IVC - GKH: Israeli VC funds raised 50% more in 2018

Dollars Photo: Shutterstock

$2.6 billion was raised by 30 funds in 2018, up from 2017, when 18 Israeli venture capital funds raised $1.7 billion.

2018 was a peak year in capital raised in Israel, according to a new report by research company IVC and law firm Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co. (GKH). The report, first published in "Globes," states that 30 new venture capital funds were founded in Israel in 2018 and jointly raised a record $2.6 billion.

The average amount raised per fund was $85 million, but the funds differ widely. The leading fund in capital raising in 2018 was aMoon, managed by Yair Schindel, which raised $660 million. The fund's main investor is Check Point (Nasdaq: CHKP) cofounder Marius Nacht, joined by the Credit Suisse investment bank, which invested $250 million, thereby making aMoon one of Israel's largest funds. Many of the funds were micro-sized, raising $10-20 million with a specialty in a certain investment area.

The amount raised was a substantial increase in comparison with 2017, when 18 Israeli venture capital funds raised a  $1.7 billion. The average amount raised per fund in 2018 was 15% less than in 2017, when the average amount raised per fund was nearly $100 million, the highest average in the past decade. 32 Israel funds raised $2.2 billion in 2016, 18 funds raised $1.5 billion in 2015, and 21 funds raised the same amount in 2014. If the especially high financing round by aMoon is excluded, the average amount raised per fund in 2018 was only $50 million.

Small and micro-funds of less than $100 million were particularly prominent in 2018. The 11 small funds ($50-100 million) in 2018 set a new record in this category, which included Sequoia, Cyberstarts, TPY Capital, Magenta, Maverick, and ICV; they jointly raised a total of $609 million. For the sake of comparison, only three funds in this category raised money in 2016, eight in 2015, and six in 2014. 10 micro-funds of less than $50 million raised a total of $120 million.

Most of the money raised by fund in 2018 was nevertheless by the large and medium-sized funds. Five medium-sized funds ($100-200 million) raised a total of $645 million, while four funds of over $200 million jointly raised $1.2 billion. Among the medium and large-sized funds were Glilot, Vintage, Vertex, StageOne, State of Mind, Pontifax, and TLV Partners. Vertex and TLV Partners, both of which raised new funds in early 2018, were also the two most active funds last year.

GKH high tech and venture capital practice head Dr. Ayal Shenhav says, "The size of a fund does not necessarily indicate whether the financing round was successful or unsuccessful. Achieving a high return is the main consideration in setting the fund's money-raising target. Fund managers frequently choose to limit the size of the round, because they believe that it will give investors in the fund a higher return, while raising more money will have a negative impact on the return." There are no formal figures for the performance of Israeli venture capital funds, but Shenhav says, "It can be assumed that a large proportion of the Israeli funds generated in the past, and will be able to continue generating, returns putting them in the top 10% of the world's funds, which is why there is a great demand for investments in Israel." Shenhav says that according to figures published in the US, the top 10% of US funds generate annual returns of 25% or more, and the top 25% of funds generate annual returns of 16% or more.

Published by Globes, Israel business news - en.globes.co.il - on March 11, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Dollars Photo: Shutterstock
Dollars Photo: Shutterstock
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