Israeli VC investments slow after record start to the year

In total in the first half of 2008, capital raised was $1.08 billion, up 28 per cent from H1 2007 levels.

“H1 figures were the highest since 2001 with Israeli high-tech investments reaching over $1 billion,” said Efrat Zakai, Director of Research at market analysts, Israeli Venture Captial (IVC), “Despite these records, first and seed investment data suggest investments by Israeli VC funds are slowing. We therefore expect end-of-year capital raising figures to be only marginally higher than the four-year average of $1.6 billion.”

The average financing round was $4.04 million, compared with $3.69 million in the second quarter of 2007 and $4.57 million in the first quarter of 2008. Seventy-eight companies attracted more than $1 million each. Of these, 17 companies raised $5 million to $10 million each, 13 companies raised $10 million to $20 million each, and 3 companies raised more than $20 million each.

In the second quarter of 2008, Israeli VCs invested $161 million in Israeli companies, down 17 per cent from second quarter of 2007 ($193 million) and 39 per cent below Q1 levels of $262 million. In the first half of 2008, on the back of robust investment levels in the first quarter, Israeli VCs invested $423 million in Israeli companies, a 16 per cent rise from the $364 million in H1 2007.

The Israeli VC share of the total amount invested in Israeli high-tech was 35 per cent in the second quarter and 39 per cent in H1, with the remainder of capital coming from foreign investors.

The Communications sector led capital raising in H1 2008 with 26 percent of capital raised followed by software at 22 per cent, life sciences at 17 per cent and Internet-related companies with 11 per cent of total capital raised.

Seed-stage companies attracted 5 per cent of capital in the first half of 2008, compared with 12 per cent in H1 2007 and 8 per cent in H1 2006.