Israeli high-tech startups raised $404 million in the second quarter of the year, according to a report released Monday.
The Israel Venture Capital Research Center quarterly survey reported that the amount represented a 12 percent increase over the previous quarter and is 4 percent higher than in the corresponding quarter a year ago.
The situation for the third quarter is unclear due to the current hostilities between Israel and Lebanon.
“We expect the military situation to have only a short-term impact, but long-term trends in the local high-tech industry will be largely affected by global developments,” said Guy Holtzman, general manager of IVC Research Center.
Foreign venture capital funds increased their share of the financing, accounting for 62 percent of the total in the second quarter.
“Foreign venture capital investors are showing more interest and involvement in Israel,” said Mr. Holtzman. He added that there has also been an increase in the involvement of Israeli investment companies and private investors in recent months.
In all, 109 startup companies raised funds during the quarter, with the average round amounting to $3.7 million. Twenty-one companies raised between $5 million and $10 million, and 13 raised more than $10 million.
Sharp Drop in Seed Funding
The second quarter witnessed a sharp drop in seed investment. Ten seed-stage companies raised $14 million, or only 3 percent of the total raised. This compares with 14 percent in the previous quarter.
“Seed investments in the first quarter were exceptionally high,” said Efrat Zakai, director of IVC Research. “When combined with the current quarter, the trend in the first half of the year is still an increase.”
The IVC survey also found a recovery in investments in the Internet sector. Investment in Internet startups attracted 9 percent of the total raised, or $36 million, in the second quarter of 2006.
That represents nearly a threefold increase over the levels of the past few years but still a third or less of the percentages in the 1999 to 2000 period. The leading sectors remained communications at 32 percent, life sciences at 17 percent, and software at 15 percent.
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