Israeli VC market hits six year record at $1.76 billion
The Israel VC market reached a new high with the largest portion coming from non-Israeli VCs. While domestic VCs focus mostly on seed, which reached another record and first round, foreign VCs tend to focus on larger later rounds. Telecoms, healthcare and semiconductor sector lead the market. A record increase of 21 percent in Q4 of 2007, was slightly skewed, as in other markets, by one big deal. We look at whether the 2008 market be affected by the credit crunch.
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Overall, 462 Israeli high-tech companies raised $1.76 billion from local and foreign venture capital investors, a rise of 8.5 percent above the $1.62 billion raised in 2006 and a massive 31.5 percent above 2005 levels.
Record Q4 with 21% increase
In the fourth quarter, 115 Israeli high-tech companies raised $503 million, a 21 percent increase from the $414 million raised by 108 companies in the third quarter and a five percent increase from Q4 2006. Capital raising in the fourth quarter - the highest in five years - included an especially large financing round of over $100 million for MobilEye. Even after adjustment, the figures indicate a stable level of capital raised relative to 2006.
Outlook for 2008: credit crunch factor
“Both investments and exits in 2008 will be dependent, to a large extent, on economic activity in the US,” said Zeev Holtzman, chairman of IVC Research Center and Giza Venture Capital. “A possible crisis on NASDAQ would mean fewer IPOs and lower acquisition values, which would impact the high-tech industry in Israel. Yet, we expect that the $1.6 billion average investment level of the last few years will be maintained in 2008.”
Average funding increase
In Q4 2007, the average company financing round was $4.37 million, compared with $3.8 million in the previous quarter and $4.5 million in the fourth quarter of 2006.
Israeli VC investment activity
In 2007, Israeli (domestic only) VCs invested $678 million in Israeli high-tech companies. The Israeli VC share of the total amount invested in Israeli high-tech companies was 39 percent. This compared to $651 million or 40 percent in 2006 and $655 million or 49 percent in 2005.
Domestic VC share remains constant
In the fourth quarter, Israeli VCs invested $142 million, which accounted for a low 28 percent share of the total invested in Israeli high-tech companies (35 percent excluding the $100 million MobilEye round). The remainder came from other investment entities, mostly foreign. The Israeli VC investment share was also substantially below the 42 percent average of the previous nine years.
First time investments made by Israeli VCs were 43 percent of the total amount invested by Israeli VCs in 2007, equal to 2006 levels. The average first and follow-on investments were $2.48 million and $0.89 million, respectively.
In the fourth quarter first investments made by Israeli VCs accounted for 33 percent of their investments, compared to 51 percent in the third quarter and 55 percent in the fourth quarter of 2006.
Capital raised by sector
In 2007, the communications sector led capital raising with $371 million or 21 percent of total capital raised, followed by life sciences with $351 million or 20 percent. “Particularly noteworthy were the semiconductor and the internet sectors” said Efrat Zakai, director of research at IVC. “Semiconductors garnered 19 percent of total investments in 2007 and 31 percent in the fourth quarter. The figures reflected, in part, MobilEye’s $100 million round. The internet sector, with $257 million raised, has markedly increased its share of investment, which reached 15 percent in 2007. This compares with figures ranging from 2 to 5 percent in the last five years.”
Capital raised by stage
In 2007, 78 seed companies attracted $151 million, the highest amount raised since 2001. At 8 percent, the share attracted by seed companies remained consistent with that of the previous four years.
In the fourth quarter, seed companies attracted only four percent, compared with seven percent in the previous quarter and 11 percent in the fourth quarter of 2006. Late stage companies captured $180 million or 36 percent of the total capital raised. This relatively high share was as a result of the $100 million MobilEye round.
The findings of the quarterly survey were conducted by the IVC Research Center, with the cooperation of the Israel Venture Association (IVA). The survey is based on reports from 84 venture investors of which 50 are Israeli management companies and 34 are other – mostly foreign – investment entities.
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© Chilli Publishing Ltd 2008 |
18 JAN 2008 |
