The current buzzword in Israeli venture capital is cleantech, states Deloitte Brightman Almagor in its “Israel VC Indicator Survey” for the third quarter of 2006. The survey is conducted among Israeli venture capital managers.
67% of respondents expect to see an increase in investment transactions in cleantech, far higher than other sectors during the next six months. In second place, 55% of respondents believe that the number of transactions in the Internet sector will increase.
Deloitte Brightman Almagor chairman and CEO Yigal Brightman said, “Cleantech is attracting more interest. It’s not just talk; money is beginning to flow to investment in the field. That said, it seems that the venture capital industry is still only in the initial stages of learning about the field. I believe that there’s a need for a strong tie-in with academic institutions where it’s possible to be exposed to a large number of technological opportunities in the field.”
Cleantech includes services, products and processes designed to produce various results at lower cost and higher quality, while minimally affecting the environment. Cleantech is broken down into a number of subsectors, including water desalination, clean energy production, and materials manufacturing technologies. Topics include geothermal energy, solar energy, water purification, and biological desalination.
Commenting on the Internet sector, Brightman said, “In view of the giant YouTube deal, we can assume that Internet will continue to grow. In the quarterly VC Indicator Survey of six months ago, we saw growing interest in the Internet. Companies that survived the last bubble demonstrated that profitable business models can achieve significant growth in the Internet. Those choosing the right model can create immense value for shareholders.”
The current survey found that, despite high-tech stamina, venture capital managers are less optimistic about the Israeli economic climate. 37% predict that the economic climate will improve over the next six months, down from an average of 55% in the last three years.
Furthermore, 15% of venture capital managers predict that Israel’s economic climate will decline over the next six months, compared with 11% in the previous quarter. 48% believe that the economic climate will remain unchanged, up from 42% in the previous quarter.
As for the second Lebanon war and its impact on the Israeli economy, venture capital managers are signalling “business as usual”. The war did not affect Israeli high-tech, or the venture capital industry. The survey found that the war had little or no effect on these sectors.
As for the war’s impact on foreign investment, 52% of respondents believe that foreign investment in venture capital funds will decline slightly, 44% believe the war will have no effect, and 4% believe that foreign investment will increase.
Brightman said, “Although foreign investors are closely reviewing the risk of escalation in the Middle East, they still assume that in the long term, Israel’s economy is strong and that its competitive advantage in high-tech will be maintained. We can assume that so long as no major escalation develops, and international intervention to calm things down in the area continues, foreign investors will continue to channel resources to Israel.”
The survey found that IPOs will be a secondary exit strategy for most high-tech companies. 33% of venture capital managers believe that exit valuations will improve, down from 55% in the first quarter of 2006 and 55% in the fourth quarter of 2005.
Published by Globes [online], Israel business news - www.globes.co.il - on October 30, 2006
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