The outlook for IPOs in the U.S. improved in the second quarter of 2011, hitting the highest number of potential deals since the recession started in 2007.

The number of companies looking to go public reached 140 in the quarter ending June 30, according to the Ernst & Young U.S. IPO Pipeline study. That's up 23.9 percent from the 113 that had registered as of Q2 2010.

Eighty-two companies filed for an IPO in the second quarter -- the highest number since before the recession -- and 42 IPOs actually came to market, up 56 percent from the first quarter of this year. IPO activity has been climbing in recent years: in the second quarter of 2010, 37 companies made their Wall Street debut, up 270 percent from the 10 that went public in Q2 2009.

"It's a great temptation to say that nothing's as hot as the weather this summer, but for the IPO market, things have also gained a good deal of steam this quarter," said Herb Engert, the Americas Leader of Strategic Growth Markets for Ernst & Young. "After a somewhat more sluggish first quarter, activity has definitely picked up."

A strong IPO market is a good sign for venture capitalists, who often use the returns to provide further investment in growing companies and growth capital to younger companies.

In a recent Deloitte & Touche study looking at the venture capital industry, partner Mark Jensen said a strong exit marketplace is critical to the venture capital ecosystem because it spurs investment in innovative ideas, which in turn drives economic growth. The Deloitte study found that 87 percent of U.S. venture capitalists say the country needs to see more IPOs.

Across the total pipeline, 49 percent of the companies in registration are sponsor-backed IPOs, with 31 percent backed by venture capital, 40 percent backed by private equity and 23 percent backed by both.

Engert of Ernst & Young said technology, energy and financial sectors are dominating the pipeline. Technology deals accounted for 25 of the 140 total companies in the pipeline, looking to raise $4.4 billion. Oil and gas companies come in second in total number of deals, though they are more highly valued at $4.6 billion.

"Technology is king right now as far as the number of deals on the docket," Engert said. "However, the largest of the proposed transactions continue to come from the Oil & Gas sector."

Banking and capital, retail and wholesale, and pharmaceuticals are also active sectors.

A few of the largest deals in the pipeline are Avaya Holdings Corp., which is seeking $1 billion, and Toys "R" Us, which is seeking $800 million.

As of June 30, Washington had three companies ready to go public: online real estate site Zillow.com (which has since made its market debut), Impinj (seeking $100 million), and HomeStreet Inc. (seeking $210 million).