Israeli startups raised $1.03 billion in the first quarter of 2017, down 8% from the corresponding quarter of 2016, IVC-ZAG reports.
In the first quarter of 2017, Israeli high-tech companies raised $1.03 billion in 155 transactions, according to the latest IVC - ZAG, This amount is 4% down from $1.07 billion raised in 165 deals in the preceding quarter and 8% down from$1.11 billion raised in 174 deals in the first quarter of 2016.
The number of transactions was down 10% in the first quarter of 2017 compared with the quarterly average of 172 deals in the previous three years. The average financing round reflected a slight increase, with $6.6 million, compared to the $6.5 million and $6.4 million averages in the preceding and corresponding quarters.
Early rounds - seed and A rounds - fell 16% and 31% respectively, with only 37 seed rounds and 40 A rounds closing in the first quarter of 2017, totaling $247 million, 8% down from $267 million raised in early rounds in the preceding quarter, and 23% down from the $320 million raised in the corresponding quarter of 2016. The number of all later rounds (B, C and later) was up 20% with 78 deals in the first quarter of 2017 compared with 65 deals in the preceding quarter, and only 5% above the 74 deals in the corresponding quarter of 2016. In terms of capital raising, only C rounds managed to top their previous record, with $285 million raised in 17 deals in the first quarter of 2017, compared with $100 million (9%) raised in the previous quarter and $234 million (21%) in the corresponding quarter of 2016.
Adv. Shmulik Zysman, founding partner of ZAG-S&W (Zysman, Aharoni, Gayer & Co.) international law firm said, "Although 2017 started as a strong and stable year for Israeli high-tech capital raising, with figures similar to previous quarters, the number of financing rounds in the first quarter was the lowest since the corresponding quarter in 2012, while the number of new startups continued to grow. We expect the Mobileye deal - which shifted paradigms regarding valuations of Israeli companies - to have future impact on the industry in terms of growth in capital raising volumes. The deal is yet another proof of the high quality and standards of Israeli companies."
He added, "The fact that most of the capital goes into mature companies currently reflects, on the one hand, the maturity of companies today, but also the low appetite of investors for young companies, which embody greater risk. If it continues, this trend is liable to harm young companies' ability to realize their potential. In addition, according to the report, most of the capital injected into the Israeli market continues to come from abroad. Thus, it emerges that high-tech investments in Israel are biased toward foreign investments in low-risk companies, which is liable to affect the future of Israeli high-tech as a whole."
In the first quarter of 2017, venture capital-backed deal-making was down, with both the proceeds and number of deals shrinking noticeably. These figures mark the lowest point in venture capital fund investments since the second quarter of 2015, with $577 million in only 68 transactions, a 19% fall from $710 million in 95 deals in the preceding quarter, and 26% down from $777 million raised in 100 venture capital-backed deals in the first quarter of 2016. While capital raised in financing rounds involving venture capital funds marked the lowest point in venture capital fund participation since the second quarter of 2015, the number of venture capital-backed financing rounds was the lowest quarterly figure recorded since 2010. The average venture capital-backed financing round in the first quarter of 2017 was up, however, with $8.5 million, compared with $7.5 million and $7.8 million in the preceding and corresponding quarter of 2016.