108 Israeli start-ups raised $303 million from venture capital funds during the third quarter of 2009, according to the IVC Research Center Survey for the third quarter, published today. The amount raised was about half of the $600 million raised by 124 start-ups in the corresponding quarter of 2008, which was an eight-year high, but was 9% more than the $279 million raised by 122 start-ups in the preceding quarter.
Israeli start-ups raised $847 million in January-September 2009, half the $1.68 billion raised in the corresponding period of 2008.
IVC chairman Zeev Holtzman said, "While investments in start-ups present a gloomy picture, the future is expected to be even worse. We’re in the midst of the VC industry’s toughest crisis since 2000. There is a major shortage of capital for new investments by Israeli VCs, and as foreign VC funds fail to find Israeli co-investors, they will further reduce their exposure to Israel. The result is that the high-tech sector - the growth engine for Israel’s economy - will experience a major setback from which it will not be able to recover. It is clear that the future for start-ups, VCs and the entire high-tech industry is at risk."
The average financing round was $2.8 million in the third quarter, compared with $2.29 million in the preceding quarter and $4.84 million in the corresponding quarter.
Israeli venture capital funds invested $89 million in Israeli start-ups, down from $113 million in the preceding quarter and less than half the $206 million invested in the corresponding quarter. Israeli venture capital funds provided 30% of the capital raised by Israeli start-ups during the third quarter, with the balance coming from foreign investors and non-venture capital Israeli investors.
Israeli venture capital funds accounted for 36% of capital raised by Israeli start-ups in January-September 2009, down from 37% in the corresponding period of last year.
First investments by Israeli venture capital funds accounted for 20% of total investments in the third quarter, down from 38% in the preceding quarter and 28% in the corresponding quarter. The average first investment by Israeli venture capital funds was $1.2 million, while the average follow-on investment was $900,000.
A breakdown of investment by industry in the third quarter is as follows: life sciences companies raised the most capital, $83.5 million (27% of total capital raised). Software companies were in second place, raising $64 million (21%).
Sixteen seed-stage start-ups raised $14 million during the third quarter (5% of the total capital raised), compared with $25 million raised by 24 seed-stage start-ups in the preceding quarter, and $16 million raised by 15 seed-stage start-ups in the corresponding quarter.
Published by Globes [online], Israel business news - www.globes-online.com - on October 21, 2009
© Copyright of Globes Publisher Itonut (1983) Ltd. 2009