The concerns for Israel's high tech start-ups may have been overdone. In a slow year of 2010, 391 Israeli high-tech companies raised $1.26 billion from local and foreign venture investors, reports Israel Venture Capital Research Center (IVC) in its quarterly survey, in cooperation with KPMG Somekh Chaikin Israel.
The figure is not especially due to Israeli venture capital funds - in 2010 local funds invested $371 million, about 30% of the total. In 2009, local venture capital funds invested 37% ($410 million) of the total and 38% ($780 million) in 2008. It appears that the trend will continue until local funds succeed in raising follow-on funds, which does not seem likely in the near future.
IVC Research Center CEO Koby Simana said, "VC fund raising is unlikely to pick up the pace before 2012.”
The $1.26 billion raised in 2010 was 13% more than the $1.12 billion raised in 2009, but 39% less the $2.08 billion raised in 2008.
In 2010, the life sciences sector led capital raising with $350 million or 28% of total capital raised, followed by the communications sector with $238 million (19%), and the Internet with $222 million (18%). The semiconductors sector rose a bit to 13% of capital raised in 2010, compared to 8% in 2009.
KPMG Somekh Chaikin’s Technology group partner Ofer Sela said, “Israel continues to be a center for excellence in life sciences in general, and in the medical devices sub-sector in particular. Medical devices was the most active area in 2010, both in terms of capital invested and the number of companies that raised capital. The ongoing increase in life expectancy and healthcare costs will continue to give impetus to medical devices over the foreseeable future.
The youngest start-ups continued to face difficulties in raising funds in 2010. 45 Seed companies attracted $38 million, the smallest amount raised by seed stage firms since 2004. The seed share of total capital raised was 3%, compared to an average of 7% over the previous seven-year period.
Mid-stage companies attracted the highest share of funds, with 46% of the total, and early stage companies attracted 42% of the total capital raised in 2010.
Israeli VC funds invested $43 million in foreign companies during 2010 (in addition to their investments in Israeli high-tech companies), compared to $80 million in 2009 and $57 million in 2008. Six of the 31 investments were first investments, with follow-ons accounting for the remainder.
In the fourth quarter, the average company financing round was $3.44 million, slightly below the $3.55 million of the third quarter, and sharply higher than the $2.22 million of the fourth quarter 2009.
Published by Globes [online], Israel business news - www.globes-online.com - on January 17, 2011
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