The following are the findings of the Quarterly Survey conducted by the IVC Research Center. This survey, conducted with the cooperation of the Israel Venture Association (IVA), reviews capital raised by private Israeli high-tech companies from Israeli venture capital funds and from other investors. The survey is based on reports from 117 venture investors of which 61 are Israeli management companies and 56 are other mostly foreign investment entities.
In the first quarter of 2004, 111 Israeli high-tech companies raised $323 million from venture investors both local and foreign.
Chart 1: Capital raised by Israeli High-Tech Companies by Quarter ($M)
The amount was up 31% from the $246 million raised by 96 companies in the previous quarter and 53% higher than the $211 million raised by 86 companies in the first quarter of 2003. The average company financing round increased by 13% from the previous quarter and 18% from the first quarter of 2003 to $2.9 million. Sixty-seven companies attracted more than $1 million. Of these, 11 companies each raised between $5 million and $10 million and ten companies each raised more than $10 million.
IVC Research chairman Zeev Holtzman said, “Capital raised in Q1 was the highest in eight quarters. The increase is a very positive sign, indicating the strength of Israel’s high-tech industry. Figures are encouraging, especially when compared to the less positive trends in the US and Europe.”
In the first quarter, Israeli VCs invested $158 million in Israeli companies, an increase of 52% from the previous quarter and 68% above Q1 2003 levels. The Israeli VC share of the total amount invested in Israeli high-tech companies rose to 49%, compared with 42% in the previous quarter.
First investments in Israeli companies accounted for 44% of total Israeli VC investments, compared with 42% in the previous quarter. The average First investment by Israeli VCs was $2.0 million, and the average Follow-on investment was $0.8 million.
IVC director of research Efrat Zakai said, “More investments, greater activity in the capital markets and a pickup in exits of Israeli companies during the first quarter indicate an improved environment which is likely to continue over the near to intermediate term.”
Israeli VCs invested $22 million in 10 foreign companies. This compares to $33 million invested in foreign companies in the previous quarter and $18 million in the first quarter of 2003. Five of the 10 investments were First investments.
Late stage companies attracted $64 million in the first quarter, compared with $44 million raised in the corresponding quarter of 2003. However, mid-stage companies continued to dominate capital raising as they had for the last six quarters. Forty-four mid-stage firms raised $169 million, 52% of total capital raised. Thirteen seed stage companies raised $13 million, 4% of the total, the same share as in the previous quarter.
Chart 2: Capital raised by Israeli High-Tech Companies Q1/2004 (%)
The communications sector led in fund raising. Twenty-seven communications companies attracted $108 million, 33% of the total amount raised, compared with 23% in the previous quarter and 37% in the first quarter of 2003. Software followed with $89 million raised by 27 companies, an increase of 65% from the amount raised in the previous quarter and 134% from the first quarter of 2003. The life sciences and the Internet sector attracted $60 and $19 million, respectively, similar to the amounts raised by these sectors in the previous quarter.
Published by Globes [online] - www.globes.co.il - on Monday, May 03, 2004