from the June 2013 issue

Foreign investment in Israeli start-ups seen rising

57% of Israeli venture capital executives expect foreign investment in Israeli start-ups to increase over the coming year, and 43% expect that the number of high-tech exits will grow, according to Deloitte Brightman Almagor Zohar's VC Indicator for the first quarter of 2013. This is the firm's 43rd quarterly survey of Israeli venture capital managers and partners.

Deloitte Israel Technology, Media & Telecommunications manager Tal Chen said, "The global giants understand that their survival in a dynamic market depends on their ability to constantly offer innovative products. They are therefore investing heavily in locating innovative technologies for both acquisition and investment."

Tal adds, "We have recently seen these investments channeled toward Israeli start-ups more intensively than ever. Israeli venture capitalists also believe that the sectors which will see the largest number of exits in the coming year are the Internet, software, IT, and security. They expect cleantech to have the lowest number of exits.

The VC Indicator survey also found an interesting trend in new sources of support and financing for start-ups. Lately, there has been a sharp increase in the number of accelerator programs for Israeli start-ups. The survey found that 68% of venture capitalists believe that these programs will have a positive effect on high tech.

The Office of the Chief Scientist has also announced a new program for financing start-ups, which the VC Indicator expects will affect venture capital funds. Israeli venture capital firms are raising less money than in the past, and the high-tech sector is seeking alternative ways to finance start-ups. Among other things, this need has resulted in the growth of accelerator programs and the Chief Scientist's new financing plan, the effect of which is being studied.

The VC Indicator also pointed to a new trend in the communications sector: the growth of consumer applications. According to the survey, 42% of venture capitalists expect the number of companies in the sector to grow, compared with 19% of respondents who expect the number to fall.

Reprinted from the Israel High-Tech & Investment Report June 2013

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