Israeli venture capital executives are pleased with Ministry of Finance plans, and expect to see an increase in mergers and acquisitions in the next six months, according to the VC Indicator Survey for the Third Quarter of 2010 by Deloitte Brightman Almagor Zohar.
70% of respondents - venture capital fund managers and partners in ISrael - support the Ministry of Finance's new planned initiative to encourage Israeli institutional investors to invest in local venture capital funds through state participation by sharing in losses at those funds. 15% of venture capitalists oppose the initiative, and an additional 15% are indifferent.
67% of the respondents said that the Ministry of Finance's plan will have a very or somewhat strong effect on local investment.
The respondents also propose an improvement for Ministry of Finance director general Haim Shani: 54% of respondents said that the ministry's job is to incentivize specific subsectors depending on national priorities, such as the biomed funds. Only 11% of respondents believe there is no room for investments in a specific subsector but rather in the technology sector as a whole.
Respondents are also optimistic in the outlook for merger and acquisition acitity. 87% of venture capitalists predict the recent surge in foreign high-tech M&A activity will reach Israel within the next 12 months. 61% of respondents believe that deal flow activity will increase over the next six months, and none expect a decline in activity.
The respondents believe that medical devices will be the hottest subsector, with 64% saying that it will have the largest number of transactions during the next six months. Biotechnology and cleantech are also expected to be hot fields: 62% of respondents believe that biotechnology will have the largest number of transactions during the next six months, and 57% of respondents believe that cleantech will have the largest number of transactions. The sectors perceived to result in least amount of transactions are telecommunications (18%) and semiconductor (21%).
As for the eternal Israeli question - exit or the creation of an "Israeli Nokia" - 57% of respondents believe that Israeli venture capital funds ought to focus on making small companies ready for fast merger and acquisition deals, while 43% of respondents believe that the funds should focus on creating large companies for public markets.
In addition to the optimism, there is the condition of seed-stage start-ups. Only 17% of respondents believe that they should spend time on screening new investments over the next three months, compared with 53% who said that they should focus on portfolio management.
Deloitte Israel Technology, Media & Telecommunications manager Tal Chen said that, in addition to the incentives program, the Ministry of Finance should increase the Office of the Chief Scientist's budget, increase incentives for start-ups until they go public, and amend the R&D law to allow the export of know-how at lower costs.
Published by Globes [online], Israel business news - www.globes-online.com - on November 1, 2010
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