First half Israeli VC rises by 10% to hit $842 million
The IVC Research Center’s quarterly survey conducted with the Israel Venture Association (IVA) has shown that in the second quarter of 2007, 118 Israeli high-tech companies raised $436 million from venture investors – both local and foreign (see chart 1).
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Sequentially, the amount was up by seven percent from the $406 million raised by 121 companies in the previous quarter and eight percent ahead of the $404 million raised by 109 companies in the second quarter of 2006.
In the first half of 2007, the capital raised was $842 million, up 10 percent from H1 2006 levels. The average high-tech financing round was $3.7 million, up nine percent from both the previous quarter and the second quarter of 2006.
Eighty-one companies attracted more than $1 million. Of these, 15 companies raised $5 million to $10 million each, and 12 companies raised more than $10 million each.
Foreign investment outweighs local VCs
The Israeli VC share of the total amount invested in Israeli high-tech was 44 percent in the second quarter, with the remainder of capital coming from foreign investors as well as non-VC Israeli investors.
Israeli VCs invested $364 million in Israeli companies, an increase of 10 percent from H1 2006 ($331 million). In H1 2007, the Israeli VC fund share of investments in Israeli high-tech companies was 43 percent as in the corresponding period in 2006. First investments by Israeli VC funds were 44 percent of their total investments, compared to 36 percent in H1 2006.
On track to hit bumper 2007
“H1 figures indicate 2007 may set a five-year record with high-tech investments reaching $1.7 billion,” said Zeev Holtzman, chairman of IVC Research Center and Giza Venture Capital. “Despite the global competition in technology-focused investments – mainly from Asian markets – Israeli high-tech industry continues to appeal to foreign investors and to benefit from the steady growth of worldwide markets.” Holtzman also added, “Israeli VC funds, relying on this positive climate, are expected to raise new funds over the coming months which, in turn, will increase their investments in high-tech companies.”
Local VCs concentration widens
First investments accounted for 38 percent of total dollar investments by Israeli VCs in the second quarter, compared with 51 percent in the previous quarter and 35 percent in the second quarter of 2006. The average first investment by Israeli VCs was $2.35 million, while the average follow-on investment was $1.07 million.
Internet & telecoms drive strong seed stage activity
Seed stage companies attracted 12 percent of capital raised, compared with only $14 million or three percent in Q2 2006. Nineteen seed companies raised $51 million in the second quarter of 2007. “The positive trend we've been seeing for the past three quarters is continuing,” said Efrat Zakai, director of research at IVC. “Investors keep designating funds to early stage investments and, for the third straight quarter, more than $50 million was invested in seed companies.”
From among seed investments in the quarter, communication companies attracted the largest share of capital – 41 percent – followed by the Internet with 22 percent.
In the first half of 2007, seed companies attracted 12 percent of capital raised, compared with eight percent in the first half of 2006 and seven percent in the first half of 2005.
Capital raised by sector (chart 2)
The life sciences sector lead capital raising with 23 percent of capital raised followed by communications with 21 percent and software with 17 percent.
The Internet sector raised $46 million (11 percent of capital raised), another sign of the increased attractiveness of the Internet sector that raised $64 million in the previous quarter – a five-year record. In the first half of 2007, Internet companies attracted 13 percent of the capital raised, compared to eight percent in the first half of 2006 and three percent in the first half of 2005.
Chart 1: Capital raised by Israeli high-tech companies ($m)
Chart 2: Capital raised by Israeli Internet companies
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