The number of Israeli start-ups raising capital has fallen by 25% in the past five years, in contrast to a 70% increase worldwide.
The number of Israeli start-ups raising capital has fallen by 25% in the past five years, in contrast to a 70% increase worldwide, according to analysis by SiSense Ltd. The analysis is based on information on 115,000 companies worldwide, including 900 Israeli companies, in the TechCrunch database. The average financing round by Israeli companies was $6.9 million, 30% less than the global average.
SiSense also found that the average A financing round by Israeli companies had fallen 40% over the past five years to $3.4 million, and that the number of companies raising capital fell by 60%. The average A financing round by start-ups worldwide fell by 12% to $6.3 million, and the number of companies raising capital fell by 9%.
By contrast, the average B round by Israeli companies rose by 9% to $11 million in 2007-12, although the number of companies raising capital was halved. Globally, average A rounds by companies also rose by 9% to $11.8 million, and the number of companies raising capital fell by 18%.
SiSense also analyzed the sectors in which the most money was invested in Israel. Semiconductors was in first place, with an average investment of $13.7 million. Hardware was in second place, with an average investment of $11.4 million; followed by cleantech, with an average investment of $8.6 million. The search sector, with an average investment of $7.6 million, and software, with an average investment of $7 million, close out the top five.
The sectors with the largest number of start-ups are software (30 start-ups), Internet (26 start-ups), e-commerce, advertising, and mobile (23 start-ups each), and gaming (17 start-ups).
SiSense also found that the average exit by an Israeli company was $123 million, 53% less than the global average of $263 million. The data indicate that the average IPO in Israel is $542 million, 21% less than the global average of $685 million.
SiSense was founded in 2004 by CPO Elad Israeli and CTO Eldad Farkash. Managed by CEO Amit Bendov, the company offers a business intelligence product for analyzing large quantities of data. Customers include Merck, US retailer Target, ESPN, and Israeli start-ups such as Wix and WeFi
SiSense VP business development Adi Azaria said" that the idea behind the company's analysis was to provide a work tool for venture capital funds to examine the average investment across different markets and industries. He says that a general analysis of the data indicates that average investments are not what they once were. "We are seeing more lean companies. It is harder for new companies to raise capital, and when they do so, they raise less money," he said.
SiSense's analysis also indicates the amount of time needed for start-ups around the world to raise an A financing round after the seed round. In 2007, 316 days were needed from the seed round to the A round, and in 2012, 505 days were needed, an increase of 60%. The time from the A to the B rounds has also increased by 35%.
"Start-ups need a lot more stamina than five years ago. Companies are trying to use every dollar they raise better, and employees' salaries are more normal, and not inflated."
