ISRAEL 
HIGH-TECH & INVESTMENT REPORT

from the July 2012 issue


H1/2012 venture capital investments down 11 percent

Q2/2012 Israeli VC fund first investments lowest in a decade
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 venture capital investments by Israeli venture capital funds, and foreign and other investors, based on reports from 123 investors of which 47 are Israeli management companies and 76 are other - including foreign - investment entities.

Israeli venture capital investments in the first half of 2012 reached $936 million, a decrease of 11 percent from $1.05 billion invested in the first half of 2011, but 62 percent above the $577 million invested in the corresponding 2010 period. In the second quarter of 2012, 128 Israeli high-tech companies raised $453 million from venture investors - both local and foreign, 6 percent below $483 million raised by 142 companies in Q1/2012 and 20 percent below the $569 million raised by 145 companies in Q2/2011.

Seventy-seven companies attracted more than $1 million each. Of these, four raised more than $20 million, 11 raised between $10 million and $20 million and 17 raised from $5 million to $10 million each.

The average company financing round was $3.54 million, compared to $3.40 million in Q1/2012 and $3.92 million in Q2/2011.

Israeli VC Fund Investment Activity
In the first half of 2012, Israeli venture capital funds invested $225 million in Israeli companies, compared to $297 million and $169 million invested in H1/2011 and H1/2010, respectively. The Israeli VC fund share was 24 percent, compared to 28 percent share in the first half of 2011.

"The percentage of high-tech investment from Israeli venture capital firms is continuing to decline as capital available for new investments is shrinking," observed Koby Simana, CEO of IVC Research Center. "Despite the continuing decline in their share, Israeli VC funds are still at the core of venture capital activity in Israel. In light of their ongoing difficulties in raising new funds, we expect a further decline in VC high-tech investments throughout this year."

In the second quarter of 2012, Israeli venture capital funds invested $106 million, a decrease of 11 percent from the previous quarter and a 34 percent decrease from the amount invested in the second quarter of 2011.

The Israeli VC fund share was 23 percent, compared to 25 percent ($119 million) in Q1/2012 and 28 percent ($160 million) in Q2/2011. The remainder of capital invested came from foreign as well as other Israeli investors.

In Q2/2012, these investments reached $217 million or 48 percent of all transactions, which was in line with the 49 percent of the previous quarter, but well above 31 percent in Q2/2011, significant returns for Israel's economy and local VCs. The skilled and talented local workforce will most likely continue to be utilized by multinationals that have already invested in the industry, recognizing Israel as one of the most innovative places in this field. While new media-related industries are thriving, it is important to remember that the semiconductor industry is the backbone of innovation and the 'technology enabler' more than any other sector."

In Q2/2012, the Internet sector led capital raising for the second time in the past decade, with $129 million (29 percent) of total capital raised. Life sciences followed with $110 million (24 percent), a 15 percent decrease from the previous quarter, but equal to the amount raised in Q2/2011. Communications attracted $78 million or 17 percent of total capital raised in the quarter.



Reprinted from the Israel High-Tech & Investment Report July 2012

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