Pitango, Giza, Genesis and Vertex are Most Active VCs
Pitango and Genesis were the funds that made the largest number of total deals (First and Follow-on) with 18 each. Israel Infinity, Israel Seed and Evergreen made 15, 14 and 13, respectively, Giza nd the Challenge Fund each made 12 deals.
In 2003, First or new portfolio investments represented 47 percent of the total amount invested by Israeli venture capital funds. This is a 10% increase from 2002 when First investments comprised just 42 percent of the total.
IVC estimates that Israeli high-tech companies raised $1 billion in 2003 from Israeli VCs and other investors. Capital raising for 2004 is projected by IVC to reach approximately the same level.
Where the VC Funds Invested
The life sciences sector is attracting an increasing share of investments by venture capital funds. This trend may prevail even further, in view of the Initial Public Offers of venture backed companies in the United States. In the fourth quarter of the year the life science sector was in the lead. Five out of 17 IPOs in the fourth quarter were in the life sciences sector. This alone, is sufficient to encourage funds to invest additional resources and effort in this direction.
Communications maintained the lead in investments during the fourth quarter of the year, attracting a total of $ 56 million (29%), which was infused into 25 companies in this sector.
The software sector maintained its relative share in total investments in monetary terms (25%), alongside a slight decrease in the number of transactions (19% as compared to 25% in the previous quarter): 14 software companies attracted investments totaling $ 48 million, two of which, accounted for $ 21 million.
The life sciences sector recorded an increase in the volume of investments (in monetary terms) and maintained a similar number of transactions. This increase is due to a large transaction of $ 13 million in the field of medical devices. In this quarter, $ 40 million was infused into 19 companies, compared to $ 16 million invested in 21 companies in the previous quarter. The field of medical devices attracted investments of $ 29 million, which was invested in 14 companies. 5 biotechnology companies raised a total of $ 11 million.
A Venture Capitalist Puts Together a Nanotech Merger
The article draws attention to Cima Nanotech, based in the town of Caesarea, Israel. In March 2002, Jacobs flew to Tel Aviv to present the Aveka business plan (Aveka was a client of Genesis) to deploy its nanotech division into a separate subsidiary. His first stop was a meeting with Zwi Vromen, the Senior Managing Director of the Millenium Fund. In turn, Zwi proposed a merger with Nanopowders Industries Ltd of Caesarea, an investee of the Millenium Fund. This merger resulted in the formation of Cima Nanotech, a Minnesota company with an Israeli subsidiary. Initially its primary products will be transparent conductive coatings and inks for the electronics market. "Subsequently, Cima closed on a venture round that was largely subscribed by Japanese venture funds and a Japanese strategic investor with whom it will establish a joint venture program to manufacture nanometal particles for conductive inks. A good number of very high wage jobs will be created in Minnesota as a result of this merger and the Japanese investment," says Harlan Jacobs. He added that Israel has now supplied critical early stage venture capital for two of his start up companies in Minnesota.
Israeli Companies Raise $1.0b. in 2003
Zeev Holtzman, Chairman of IVC Research, said "Today, some ten VCs are in a race to raise new funds, and we forecast that they will succeed in raising $1 billion in 2004. Therefore, we foresee an increase in the pace of technology investments in light of the more buoyant capital markets in Israel and abroad."
In the fourth quarter of 2003, 96 Israeli high-tech companies raised $246 million. This figure is 13 percent lower than the $283 million raised by 103 companies during the third quarter, yet 20 percent above the $205 million raised by 89 companies in the fourth quarter of 2002. Fifty companies attracted more than $1 million each. Of these, eight companies raised between $5 million and $10 million each and seven companies raised more than $10 million each.
The average company financing round, at $2.7 million in 2003, continued to slide. The average round was $3.2 million in 2002. In the fourth quarter, the average round was $2.5 million, compared with $2.3 million in the fourth quarter of 2002.
Markstone Capital Wins $200 m. and Closes Fund with $400m.
G. Alan Hevesi is state comptroller of the State of New York. He commands a workforce of 2,400 people. But his real power derives from his position as sole trustee of the NYSCRF, or the New York State Common Retirement Fund. Hevesi decided that NYSCRF will be investing $200 million in Markstone, an investment fund that means to raise $500 million for investment in Israel.
One of Israel's daily newspapers recently nominated Ron Lubash, the managing partner of Markstone as the Man of the Year. In our July 2003 issue in our editorial titled Winning Investors Get their Timing Right we wrote about Ron Lubash . Sincfe then a number of our readers have expressed an interest in investing in Markstone Capital. We continue to believe that it will be a big winner.
The IVC Research Center has published its compilation of the most active Israeli venture capital funds of 2003. Topping the list of active investors based on First investments is Pitango with eight new portfolio investments in 2003 (compared to four in 2002), three of which were in the life sciences sector and three in IT. Giza, Genesis and Vertex trailed Pitango with six First investments each. Genesis and Vertex investments were mostly in the IT and communications sectors, while Giza opted for the life sciences sector in four of its six new investments. Guy Holtzman, IVC General Manager, observed that "Israeli VC funds were focused on supporting their portfolio companies over the last two years. Only recently have we seen a rise in First investments. This trend is likely to continue in 2004."
The Money Tree Survey conducted by Kesselman &
Kesselman/PricewaterhouseCoopers (PwC), indicates that the level of investment in high-tech companies, backed by venture capital funds in the fourth quarter of 2003, was similar to the level recorded in the preceding quarter, both in terms of the number and total value of the transactions. 74 high-tech companies raised $ 192 million during the fourth quarter, as compared to $ 190 million that was invested in 76 companies the preceding quarter. The average investment in each company was $ 2.6 million.
A closer view of the funds shows that 71 venture capital funds participated in the survey this quarter, 25 of which have made no investments during the quarter. Five funds had not made any investments in 2003 and 8 local funds had only made investments in one quarter of the year.
Harlan Jacobs is the founder and president of Genesis Business Centers, Ltd., in Minnesota . Genesis is a diversified high tech, for-profit incubator program. Jacobs has had successful experience in investing in Israeli high-tech companies. He recently contacted us and drew our attention to a major article in the NY Times on Israeli nanotechnology.
During 2003, Israeli high-tech companies raised $1.011 billion from venture investors, local and foreign (Chart 1). The amount is 11 percent below the $1.138 billion raised in 2002, but approximates the $1.013 billion raised in 1999. Three hundred and seventy two companies raised capital in 2003, compared to three hundred and fifty-two companies in 2002, and three hundred and thirty-eight in 1999.