In 2011, 546 Israeli high-tech companies attracted $2.14 billion from local and foreign venture investors, the highest amount in 11 years. This is almost 70 percent above the $1.26 billion raised by 391 companies in 2010 and 91 percent above the $1.12 billion raised in 2009. The average company financing round was $3.92 million in 2011, above the $3.23 million of 2010, and the $2.51 million of 2009.
"As predicted, 2011 numbers were impressive, but our forecast for 2012 is not as optimistic," said Koby Simana, CEO of IVC Research Center. "As local venture capital funds have found it increasingly difficult to raise new capital and maintain a satisfactory level of first investments in early stage companies, foreign investors have been upping their investments, which more than doubled in the past year," he explained. "However, with Israeli VCs continuing to downsize their investments and with the world economy still very much unsettled, foreign investors can no longer be counted on to fill in the gap. We believe annual investment can fall to as low as $1.5 billion if there is no dramatic recovery in the next few months."
One hundred and twenty-four Israeli high-tech companies raised $569 million from venture investors - both local and foreign in the fourth quarter of 2011. This is an increase of 9 percent from $522 million raised by 137 companies in the previous quarter, and a 65 percent jump from $344 million raised by 100 companies in Q4 2010.
The average company financing round was $4.59 million in Q4 2011, compared with $3.81 million in the previous quarter, and $3.44 million in the year-earlier 2010 period.
In Q4/2011, 77 companies attracted more than $1 million each. Of these, five raised more than $20 million, 13 raised between $10 million and $20 million, and 17 raised from $5 million to $10 million each.
Israeli VC Fund Investment Activity
First investments by Israeli VC funds accounted for 31 percent of their total investments, compared to 29 percent in 2010 and 2009. The average first investment in 2011 was $2.21 million, while the average follow-on investment was $1.06 million.
In the fourth quarter, first investments by Israeli VC funds accounted for 44 percent of their total investments, the highest percentage of any quarter in the last four years. This compares to 30 percent and 25 percent in Q3/2011 and Q4/2010, respectively. The average first investment by Israeli VC funds in the fourth quarter was $2.9 million, while the average follow-on investment was $0.95 million.
Investment Rounds Excluding Israeli VC Fund Participation
In 2011, investment transactions in Israeli high-tech companies that excluded Israeli VC fund investment reached $785 million or 37 percent, the highest percentage in the last decade. This compares with $269 million (21 percent) and $205 million (18 percent) invested in 2010 and 2009, respectively.
In the fourth quarter of 2011, investments reached $218 million, 8 percent below the $236 million of the previous quarter, which was the highest quarterly amount in 10 years.
In 2011, Israeli venture capital funds invested $525 million in Israeli companies, an increase of 42 percent from 2010, and a rise of 28 percent from 2009 levels. The Israeli VC fund share of total investment was 25 percent, the lowest in the last decade when the Israeli VC share averaged 40 percent.