Though there was an increase in number of Israeli startups that managed to raise money last year, there was less money raised. Last year, 575 Israeli high tech companies raised $1.92 billion from the investment community, a 10 percent decrease over 2011 when 545 raised $2.14 billion, according to a recent report from the IVC Research Center.
VC backed deals involving at least one venture capital fund made up $1.37 billion of that $1.92 billion, down 22 percent from the VC backed deals in 2011 that raised $1.76 billion.
“Despite a decrease in capital raising, the figures in fact demonstrate the strength of Israel’s high-tech industry,” said Koby Simana, IVC CEO. “While investment by Israeli VC funds is shrinking, foreign VCs as well as corporate and private investors are gradually increasing their activity. As a result, I’m optimistic about the high-tech industry’s chances of maintaining the current level of capital raising in the coming year.”
Israeli VC fund investments were also lagging last year, amounting to $516 million, a 19 percent decrease over the $638 million invested by Israeli firms in 2011. About 38 percent ($195 million) were initial investments, an 8 percent increase over the previous year. Israeli VC investments were also down in the fourth quarter of 2012 compared to the same period last year, with $140 million invested in the fourth quarter of 2012 compared to $150 million in the fourth quarter of 2011. About 48 percent of the investments made by Israeli VC funds were first time investments.
The fourth quarter saw a 5 percent increase over the third, with 163 Israeli high tech firms raising $494 million compared to the $468 million raised in the third quarter, but it was a 14 percent decrease over the same period in 2011, when 124 companies raised $571 million the fourth quarter of 2011.
“The year 2012 was a record one in terms of the number of companies raising capital over the past decade. In early stage investments, micro-VCs and angel investors succeeded in filling the void left by Israeli Vcs,” said Ofer Sela, partner in KPMG Somekh Chaikin’s Technology group. “The Internet sector proved, by far, to be the most attractive sector as more than twice as many early stage Internet companies were funded in 2012 than in 2011. Technology developments in recent years in both cloud-based infrastructure and content delivery platforms have enabled Internet companies to mature and develop their intended technology with greater capital efficiency than any other sector.”
Life sciences captured the lions share of Israeli tech investment, with 134 companies raising $497 million, a 28 percent increase over 2011. The Internet sector made up 21 percent, followed by software and communications at 17 percent each.