Israeli high-tech venture capital rises to US$479 M in first three months of 2011

In the first quarter of 2011, 140 Israeli high-tech companies raised $479 million from local and foreign venture capital investors, the highest quarterly amount raised in the last two years.

The figure is 39 per cent more than was raised by 100 companies in the previous quarter and 105 per cent above the amount raised by 91 companies in the equivalent quarter of 2010, which was the weakest quarter in the past five years.

The average company financing round in the first quarter of this year was $3.42 million, just short of the $3.44 million of the previous quarter, and sharply above the $2.57 million of the first quarter of 2010.

Eighty-seven companies attracted more than $1 million each. Of these, 20 raised from $5 million to $10 million each, 11 raised between $10 million and $20 million and three raised more than $20 million.

Israeli VC fund investment activity

In the first quarter of 2011, Israeli venture capital funds invested $137 million in Israeli companies, the highest quarterly amount in the last two years. This was 47 percent above the amount invested in the previous quarter, and 76 percent above investments made in the first quarter of 2010.

Koby Simana, CEO of IVC Research Centre, which compiles the data said, “The first quarter of 2011 brought a surprisingly large increase in capital raised by Israeli high-tech companies. When we look at the data, we see that the share that came from Israeli venture capital funds held at around 30 percent.” Simana added, “The good news for Israel’s high-tech industry is that it was able to meet its financing needs in large part via foreign investors, as well as non-VC Israeli investors.” 

Israeli VC fund activity in foreign companies

In addition to their investments in domestic companies, Israeli VC funds invested $56 million in foreign companies in the first three months of 2011.

Ofer Sela, partner at the management consultants KPMG, which co-authored the report, said, “We’ve experienced another outstanding quarter for the life sciences sector, especially for diagnostic and medical device companies. Additionally, we are seeing somewhat of a recovery in seed stage investing, notably for the communications and Internet sectors, where investors received positive returns as a result of exits in the last two quarters.”

But said Sela, “It’s too early to determine if this recovery is sustainable, particularly since no new VCs were founded during the last 18 months.”