from the September 2008 issue

Start-ups raise over $1 billion

High-tech start-ups in Israel raised $1.08 billion in the first half of 2008, the highest sum since 2001, when $1.15 billion was raised over the first six months. According to the IVC quarterly survey, in the second quarter of 2008, 115 Israeli high-tech companies raised a total of $465 million from venture capital investors both local and foreign. The figure represented a 7% increase over the corresponding quarter of 2007, but was 25% below the unusually high first quarter of the year. In the first half of 2008, capital raised was $1.08 billion, up 28% from the amount raised in the first half of 2007. "First half figures were the highest since 2001, with Israeli high-tech investments reaching over $1 billion," said IVC director of research Efrat Zakai. Zakai warns, however, "Despite these records, first and seed investment data suggest investments by Israeli VC funds are slowing. We therefore expect end-of-year capital raising figures to be only marginally higher than the four-year average of $1.6 billion." Seventy-eight companies raised over $1 million each. 17 of those companies raised $5 million to $10 million each, 13 companies raised $10 million to $20 million each, and 3 companies raised more than $20 million each. In the second quarter of 2008, Israeli VCs invested $161 million in Israeli companies, a decrease of 17% from second quarter of 2007 ($193 million) and 39% below first quarter levels of $262 million. The Israeli VC share of the total amount invested in Israeli high-tech was 35% in the second quarter and 39% in the first half, with the remainder of capital coming from foreign investors as well as non-VC Israeli investors. The sector which raised the most VC funds in the first half was the communications sector, 26% of capital raised. It was followed by software with 22%, the life sciences with 17%, and the internet sector with 11% of total capital raised. Seed companies attracted 5% of capital raised in the first half of 2008, compared with 12% in 2007. Early Stage companies captured 34% of capital raised, mid-stage companies (up to $10 million in revenues) 37%, and late stage companies 24%.

Reprinted from the Israel High-Tech & Investment Report September 2008

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