The figures are based on reports from 93 investors of which 52 are Israeli management companies and 41 are other, including foreign, investment entities. The complete annual results will be published in IVC’s 2010 yearbook in April 2010.
In the fourth quarter of 2009, 124 Israeli high-tech companies raised $275 million, a 30 per cent fall on the $394 million raised in the fourth quarter of 2008, and 9 per cent down from the $303 million raised in the third quarter of 2009.
In the quarter, the average company financing round was also lower at $2.22 million, compared to $3.61 million in the fourth quarter of 2008 and $2.8 million in the previous quarter of 2009.
Sixty-seven companies attracted more than $1 million each. Of these, 17 raised $5 million to $10 million each, and four companies raised more than $10 million.
Worse is to come: “Even though 2009 capital raising was sharply lower than the previous year [as we predicted] a further decrease to about $800 million is foreseen for 2010,” said Koby Simana, CEO of IVC Research Centre.
“The decline in capital raising in 2009 reflected the impact of the economic crisis on Israel’s high-tech industry, but despite talk of recovery, the effect of the economic situation continues to linger. Israeli companies are likely to have an even harder time raising capital in 2010,” Simana concluded.
Israeli VC Funds - Investment Activity
In 2009, Israeli VC funds invested $410 million in Israeli high-tech companies. This was just under 37 per cent of total funds raised, which compares to 38 per cent ($780 million) in 2008 and 39 per cent ($678 million) in 2007.
In the fourth quarter, Israeli VC funds invested $102 million or 37 per cent of the total capital invested in Israeli high-tech companies, compared to $151 million invested in Q4 of 2008 and $89 million invested in the previous quarter.
In 2009 as a whole, first investments made by Israeli VCs accounted for 29 per cent of the total amount invested by Israeli VC funds, compared to 31 per cent in 2008. The average first and follow-on investments were $2.07 million and $0.86 million, respectively.
Israeli VC funds invested $80 million in foreign companies during 2009, in addition to their investments in Israeli high-tech companies, compared to $57 million in 2008 and $50 million in 2007.
Capital raised by sector
In 2009, the life sciences sector led capital raising with $272 million or 24 per cent of the total raised, followed by software with $258 million or 23 per cent, and the communications sector with $219 million or 20 per cent. Internet firms continued to attract investor attention, with 13 per cent of capital raised in 2009 and 14 per cent and 15 per cent in 2008 and 2007, respectively.
Capital raised by stage of corporate development
In 2009, 77 seed companies attracted $63 million, the lowest amount raised since 2004. At 5.5 per cent, the Seed share of total capital raised was in line with the 5 per cent of the previous year, which was lower than the previous four-year average of 8 per cent.