IVC: Israeli start-ups raising record amounts

The $643 million raised in the first quarter was the second highest quarterly amount ever raised.

Although Israeli high-tech start-ups raised less money in the first quarter of 2014 than in the preceding company, the $643 million raised by 160 companies was the second highest quarterly amount ever raised, exceeded only by the $801 million raised in the fourth quarter of 2013, IVC Research Center and KPMG Israel Somekh Chaikin announced today. Capital raised in the first quarter was 53% more than the $439 million raised in the corresponding quarter of 2013.

"The bullish US capital market and capital raising for technology companies via IPOs on Nasdaq in the last 12 months have been drivers of venture capital, both globally and in Israel. Venture-backed revenue stage growth companies are raising substantially higher amounts of capital on average than in the past, positioning themselves for continued market expansion and significant acquisition and/or Nasdaq IPO," said KPMG Somekh Chaikin Technology Group partner Ofer Sela. "This is an indicator of the maturity of the Israeli technology market and signifies that Israeli VC-backed companies are market leaders, providing more than just a ‘great technology solution.’ These later stage rounds are being led by investors who tend not to be venture capital investors. They are bestowing significantly higher valuations and lower risk to deals, similar to the private equity industry."

The decline in investments by Israeli venture capital funds continued in the first quarter, amounting to $106 million, the lowest quarterly share - 16% - on record, and down 25% from the preceding quarter and 33% from the corresponding quarter.

"This is the third quarter in a row that capital raising exceeded $650 million. These are great figures that show a sustained, positive momentum for the Israeli high-tech industry,” said IVC Research Center Koby Simana. “At the same time, high-tech’s success is clouded by the weakness of local venture capital funds, with investments continuing to shrink from quarter to quarter." He added, “While foreign VC participation in Israel is a positive development for the high-tech industry, it is important to understand that at the core of the process lies a clear food chain. Without funds raised by local VCs, there won’t be sufficient capital for early stage investments. Without early stage financing, there won’t be late stage investments. Therefore, it is critical to understand that prolonged absence of Israeli VC funds threatens high-tech industry growth in the longer run."

Internet start-ups raised the most capital in the first quarter, $260 million, or 39% of the total - the highest amount and share by the sector since 2000. Software companies were in second place, despite the steady drop in their share of total capital raised to 21% in the first quarter from 23% in the preceding quarter and 31% in the corresponding quarter.

Late-stage companies raised $227 million in the first quarter, 34% of the total raised, mid-stage companies raised $221 million, and seed-stage companies accounted for 6%.

Published by Globes [online], Israel business news - www.globes-online.com - on April 29, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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