Q1-Q3/2007
"Q3 figures indicate 2007 may set a five-year record with high-tech investments reaching $1.7 billion," said Zeev Holtzman, Chairman of IVC Research Center and Giza Venture Capital. "In order to complete the positive picture, we hope that the intensive investment activity will be expressed in substantial exits of over $500 million in the upcoming year that will enable the Israeli VC industry to show significant returns on their investments."
The average company financing round was $3.83 million in Q3, compared with $4.38 million in the third quarter of 2006 and $3.69 million in Q2 of this year. Seventy three companies attracted more than $1 million. Of these, 13 companies raised between $5 million and $10 million each, 11 companies raised between $10 million and $20 million each, and three companies raised over $20 million.
In the three first quarters of 2007 Israeli high-tech companies raised $1.256 billion, 10 percent above the $1.145 billion raised in the corresponding period of 2006.
In Q3, Israeli VCs invested $172 million in Israeli companies, compared with $142 million invested in Q3 2006 and $193 million invested in Q2. The Israeli VC share of the total amount invested in Israeli high-tech was 42 percent, with the remainder of capital coming from foreign investors as well as non-VC Israeli investors.
First investments accounted for 51 percent of total dollar investments by Israeli VCs in the third quarter, compared with 44 percent in the in the third quarter of 2006 and 38 percent in Q2. The average First investment by Israeli VCs was $3.25 million, while the average Follow-on investment was $0.83 million.
In the first three quarters of 2007, the Israeli VC fund share of investments in Israeli high-tech companies was 43 percent, compared to 41 percent in the corresponding period in 2006.
Capital Raised by Sector
Capital raised by stage
Israeli VC investments in foreign companies
VC-backed high-tech cos raised $350m in Q3
74 Israeli high-tech companies raised capital during the third quarter, compared with 80 companies in the preceding quarter and 66 in the corresponding quarter. The average financing round was $4.7 million in the third quarter, compared with $4 million in the preceding quarter and $3.8 million in the corresponding quarter.
There was a switch to investment in mid and late-stage start-ups from early-stage start ups during the third quarter. 61 mid and late-stage start-ups raised $314 million, 90% of the total amount raised by start-ups during the third quarter, and the largest proportion in ten quarters, since the third quarter of 2004. Most investments by venture capital funds in mid and late-stage start-ups were follow-on investments.
Ernst & Young: 95% jump in early-stage funding
VentureOne reports a 95% increase in early-stage investment in the third quarter, compared with the corresponding quarter. It says that 17 early-stage start-ups raised an aggregate $113 million, compared with the $58 million raised by 13 early-stage start-ups in the corresponding quarter. This finding contradicts the finding by the PricewaterhouseCooper's MoneyTree report for the third quarter, which states that 13 early-stage start-ups raised an aggregate $36 million, less than the amount raised in the corresponding quarter.
In the third quarter of 2007, 108 Israeli high-tech companies raised $414 million from venture investors - both local and foreign. The quarterly amount was 9 percent above the $381 million raised in the third quarter of 2006, but down 5 percent from the $436 million raised in the previous quarter.
In Q3/07, the Communications sector led capital raising with $83 million or 20 percent of capital raised followed by Semiconductors with $74 million or 18 percent of total capital raised. The amount raised by Semiconductor companies reflected two especially large financing rounds aggregating over $50 million. The Software and the Internet sectors share third place with 17 percent of capital raised. "Internet companies attracted $71 million, up ten-fold from the third quarter last year and the most raised by this sector since the first quarter of 2001," remarked Efrat Zakai, Director of Research at IVC. "The Internet sector show consistent increase and capture more distinguished part of the total funds. From the beginning of 2007 internet companies captured 14 percent of total capital raised, this compared with 6 percent in the first three quarter of 2006 and only 2 percent in 2005 parallel period."
Eighteen Seed companies attracted $28 million, 7 percent of the total amount raised in Q3, compared to $20 million (5 percent) in the third quarter of 2006 and $51 million (12 percent) in the previous quarter. During the first three quarters of the year, Seed companies attracted 11 percent of the total funds, compared with 7 percent in Q1-Q3 2006.
Israeli VCs invested $9 million in nine foreign companies during Q3 2007, compared to $6 million invested in foreign companies in the third quarter of 2006 and $18 million invested in the previous quarter. All nine investments were Follow-on investments.
In the first three quarters of 2007, the Israeli VCs invested $36 million in foreign companies.
Israeli venture capital-backed high-tech companies raised $350 million in the third quarter 2007, the highest quarterly amount since the fourth quarter of 2001, according to the PricewaterhouseCooper's MoneyTree report. High-tech companies raised 10% more in the third quarter than the $319 million raised in the preceding quarter and 39% more than the $253 million raised in the corresponding quarter of 2006.
The Israeli venture capital industry invested $361 million in 39 transactions during the third quarter of 2007, 19% more than in the corresponding quarter of 2006, states the Ernst & Young and Dow Jones VentureOne's survey of global venture capital investment.