The following are the findings of the IVC-KPMG Quarterly Survey conducted by the IVC Research Center in cooperation with KPMG Somekh Chaikin Israel. This Survey reviews capital raised by private Israeli high-tech companies from Israeli venture capital funds, foreign and other investors. The Survey is based on reports from 128 investors, of which 50 are Israeli management companies and 78 are other - including foreign - investment entities.
In the first quarter of 2011, 140 Israeli high-tech companies raised $479 million from venture investors - both local and foreign. This was the highest quarterly amount raised in the last two years, 39 percent above the amount raised by 100 companies in the previous quarter and 105 percent above that raised by 91 companies in Q1/2010 (the weakest quarter in the past five years). (Chart 1)
The average company financing round was $3.42 million in Q1/2011, just short of the $3.44 million of the previous quarter, and sharply above the $2.57 million of the first quarter of 2010.
Eighty-seven companies attracted more than $1 million each. Of these, 20 raised from $5 million to $10 million each, 11 raised between $10 million and $20 million and three raised more than $20 million.
Israeli VC Fund Investment Activity Koby Simana, CEO of IVC Research Center observed that "The first quarter of 2011 brought a surprisingly large increase in capital raised by Israeli high-tech companies. When we look at the data, we see that the share that came from Israeli venture capital funds held at around 30 percent, and the majority of the increase is traced to financing rounds - totaling $157 million - in which Israeli VC funds did not participate, three times the amount in the previous quarter. The good news for Israel's high-tech industry is that it was able to meet its financing needs in large part via foreign investors, as well as non-VC Israeli investors."
The Israeli VC fund share of the total amount invested in Israeli high-tech companies was 28 percent, compared to 27 percent ($93 million) in Q4/2010 and 33 percent ($78 million) in Q1/2010. The remainder of capital came from foreign as well as non-VC Israeli investors.
First investments by Israeli VC funds accounted for 23 percent of their total dollar investments in the first quarter, compared to 25 percent and 24 percent in Q4/2010 and Q1/2010, respectively. The average First investment by Israeli VC funds was $1.88 million, while the average Follow-on investment was $1.15 million.
Israeli VC fund activity in foreign companies
Ofer Sela, partner in KPMG Somekh Chaikin's Technology group, said: "We've experienced another outstanding quarter for the life sciences sector, especially for diagnostic and medical device companies. Investors have given a vote of confidence to Israel as a center of excellence in these fields. Additionally, we are seeing somewhat of a recovery in seed stage investing, notably for the communications and Internet sectors, where investors received positive returns as a result of exits in the last two quarters. It's too early to determine if this recovery is sustainable, particularly since no new VCs were founded during the last 18 months."
Capital Raised by Sector
Capital Raised by Stage
In the first quarter of 2011, Israeli venture capital funds invested $137 million in Israeli companies - the highest quarterly amount in the last two years. It was 47 percent above the amount invested in the previous quarter, and 76 percent above investments made in the first quarter of 2010.
Israeli VC funds invested $56 million in foreign companies in Q1/2011 (in addition to their investments in Israeli high-tech companies). This was the highest quarterly amount invested in foreign companies by Israeli VCs in the last decade and considerably more than the $8 million and $3 million invested in Q4/2010 and Q1/ 2010, respectively. Two of the six investments were first investments, with follow-ons accounting for the remainder.
In Q1/2011, the Life Sciences sector led capital raising, as in the previous quarter, with $127 million or 27 percent of total capital raised. Internet followed with $86 million or 18 percent, and Software with $79 million or 16 percent. In each of the three sectors, amounts raised were the highest in the last two years. The Semiconductors sector followed with 12 percent of capital raised in the quarter.
In the first quarter of 2011, seed companies attracted 3 percent of total capital raised, compared with 2 percent in the previous quarter and 5 percent in the fourth quarter of 2010. Mid Stage companies captured $238 million or 50 percent of the total capital raised.