from the August 2013 issue

Exits are Getting Larger

One of the criticisms of Israel's high companies has been their tendency to sell out early in their career. This is no longer so as in recent times we have experienced two one billion dollar exits. This is probably a good thing as companies that mature acquire a greater value than younger ones.

This will not prevent young companies to sell themselves as there is a get rich quickly tendency.

Later exits also make it more attractive for foreign investors who tend to be attracted by the prospects of attractive returns.

Israeli high-tech firms raised $474 million in venture capital in the first quarter, after raising $1.92 billion in 2012, The Israel Venture Capital (IVC) Research Center said.

The amount raised in the January-March period was 4 percent lower than the fourth quarter and 2 percent below the first quarter of 2012, IVC, in cooperation with the Israeli office of consultancy KPMG, said in a report.

"The majority of funding during the first quarter of 2013 was allocated to companies already generating revenue in businesses where feasibility was already proven," said Ofer Sela, a partner at KPMG's technology group. "Most funding to companies at that stage was directed to the software and Internet sectors. This reflects the cautiousness of investors nowadays."

Israeli high-tech companies are key drivers of the Israeli economy, helping to spur growth of 3.2 percent in 2012. IVC expects a similar level of capital raising in 2013 as in 2012.

Israeli VC fund investments accounted for $147 million in the first quarter, up 18 percent from a year earlier.

"The increase in Israeli VC fund activity in the first quarter of 2013 is a direct result of capital raising by the funds in 2012," said Koby Simana, chief executive of the IVC Research Center.

"Several funds are currently in advanced stages of capital raising. As a result, we expect the overall amount of capital to grow, expanding Israeli VC fund investments in local high-tech companies, and even possibly increasing their share of investments in the industry."

In the first quarter, the software sector attracted the largest share of funds for the first time in four years at 29 percent, followed by the Internet sector at 22 percent.

"The current year opened with a very strong quarter for the information technologies and software sector, with a record high level of investments both in amount invested and number of transactions made, This sector, traditionally one of the backbones of the Israeli high-tech industry, is mainly being propelled by cloud based enterprise applications and IT security" added Sela.

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

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