from the October 2008 issue

Hi-tech companies raise $291 million in second quarter

Israeli technology companies, backed by venture capital funds raised $291 million in the second quarter, down 32 percent from the first, according to a report from Kesselman and Kesselman PricewaterhouseCoopers MoneyTree.

Sixty-nine technology companies raised capital during the quarter, down from 92 in the first and 80 a year earlier, according to the report released Tuesday. The average investment per company was $4.2m., compared with $4.6m. in the first quarter and $4m. in the same period last year.

"Venture capital funds have, in the absence of financing opportunities in the financial markets, chosen to lend their support to companies whose operations are at a more mature stage of development," said Rubi Suliman, a partner at Kesselman. "This trend opens the door wide for angels and other investment entities to fund seed companies."

On July 16, the Israel Venture Capital Research Center said investment by Israeli venture capital funds was slowing.

Deloitte Brightman Almagor Zohar's quarterly VC Indicato survey released recently said most Israeli venture capitalists believed it would be difficult to make an initial public offering on the Nasdaq 2009.

"When looking at recent quarters, it may be possible to discern a trend whereby venture capital funds have begun to focus on software-based sectors at the expense of other sectors," Joseph Fellus, another partner at Kesselman, said in Tuesday's report. "A continuation of this trend will inevitably lead to a structural change in the nature of the Israel hi-tech industry."

Investment in the first six months of the year totaled $717m., the highest first-half amount since 2001, the report said.

Reprinted from the Israel High-Tech & Investment Report October 2008

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