In a sign of the recession's impact on Israel's start-up and venture capital industry, the first quarter of 2009 was the lowest quarter in three years in terms of capital raised by start-ups. According to the Israel Venture Capital Research Center - IVC 93 Israeli high-tech companies raised $265 million from venture investors, both local and foreign, in the first quarter.
The first quarter figure was 57% lower than the $617 million raised by 135 companies in the corresponding quarter of 2008 (which was the highest in seven years) and 33% lower than the $394 million raised by 109 companies in the fourth quarter of the previous year.
Israeli VC funds invested $106 million in Israeli companies in the first quarter, 60% below the amount invested in the first quarter of 2008. However, the Israeli VC funds’ share of the total amount invested rose slightly to 40% from 38% in the corresponding quarter. The remainder of capital came from foreign investors as well as non-VC Israeli investors.
The average financing round was $2.85 million, compared to $4.57 million in the first quarter of 2008 and $3.61 million in the previous quarter.
51 companies attracted more than $1 million each. Of these, 10 companies raised $5 million to $10 million each, six companies raised $10 million to $20 million, and one company raised over $20 million.
The communications sector led capital raising in the first quarter with $91 million or 34% of capital raised, followed by the software sector with $56 million (21%), and the life sciences sector with $50 million (19%).
Seed investing fell sharply, with 20 seed companies getting a total of $13 million, 5% of the total amount raised in the quarter, compared with $35 million raised by 27 companies in the corresponding quarter, and $31 million raised by 10 companies in the fourth quarter of 2008.
Regarding the remainder of the year, IVC CEO Koby Simana said, “The ramifications of the economic slow-down are being felt in Israel as we anticipated. The decrease is similar to that being experienced in the rest of the world, and as a result, we believe that Israeli high-tech companies’ capital raising will not exceed $1 billion in 2009.”
Published by Globes [online], Israel business news - www.globes-online.com - on April 27, 2009
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