from the September 2007 issue

Explosive Growth to Continue

Not since the bubbly days of the dot com boom that peaked in April 2000 has the Israeli high-technology sector experienced such a high level of explosive growth.

Israeli startups financed by venture capital racked up $2.5 billion in exits (buyouts or share issues) in the first half of 2007. According to figures published by accounting firm Ernst and Young and research firm VentureOne, this amount was almost as much as the entire 2006 total.  The value of purchases of Israeli startups for the first six months of 2007, excluding stock issues, was $1.015 billion, according to figures from IVC-Online. Ernst and Young estimates that for all of 2007, the total will reach $3.2-3.5 billion. This would be a 25 percent increase over 2006, making it the best year since 2000.

The future appears to be bright.  In the second quarter of 2007, 118 Israeli high-tech companies raised $436 million from venture investors - both local and foreign. 121 companies up 7 percent from $406 million raised the amount in the previous quarter, and 8 percent ahead of the $404 million raised by 109 companies in the second quarter of 2006. In the first half of 2007, capital raised was $842 million, up 10 percent from H1 2006 levels. Moreover, foreign direct investments in 2007 are expected to grow by 8.0%, reaching $15.3 billion, as compared to $14.2 billion in 2006 (2005: $4.8 billion; 2004.

Israeli exports are also having a banner year and should experience more than $30b. in exports in 2007. There has been a major jump in defense exports. Defense exports hit an all-time record last year, as signed contracts for defense industry deals with foreign armies reached $4.18 billion. Defense exports have also led to civilian exports. India has purchased several desalination plants while being major buyers of defense systems. The conditions that have fueled the growth remain constant. Government support for infant companies remains intact. Almost any start-up can qualify for a $200,000 grant. The incubator program offers support for entrepreneurs who are relieved of many of the administrative chores. Indications are that venture capital investments, from Israel and abroad, are plentiful. Youngsters are flocking to colleges to earn technical degrees. Demobbed soldiers entering the working place are bringing with them a high kevel of technological know-how,

Under these conditions it is clear that 2007 will be a record year and serve as a solid foundation for 2008.

Reprinted from the Israel High-Tech & Investment Report September 2007

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