Israeli venture capital-backed start-ups raised $162 million in the second quarter of 2009, 16% less than the $194 million raised in the first quarter, and 44% less than the $291 million raised in the corresponding quarter of 2008, reports Kesselman & Kesselman - PricewaterhouseCooper Israel in its Israel MoneyTree Report for the second quarter.
61 high-tech companies raised capital during the second quarter, compared with 49 companies in the preceding quarter and 69 companies in the corresponding quarter. The average investment was $2.7 million in the second quarter, down from $4 million in the preceding quarter and $4.2 million in the corresponding quarter. The average investment was the lowest in five years.
Israeli high-tech companies raised $279m in venture capital in Q2 2009
In the second quarter of 2009, 122 Israeli high-tech companies raised $279m from venture investors - both local and foreign. The amount was 40 per cent below the $465m raised by 115 companies in the second quarter of 2008, but five per cent higher than the amount raised in the first quarter of this year.
In the first half of 2009, capital raised by Israeli high-tech companies was $544m, 50 per cent below H1 2008 levels of $1.1bn (the highest since 2001).
"We are not surprised by these numbers," said Koby Simana, CEO of IVC Research Center. "The amount and rate of capital raised are in line with our earlier forecast of $1bn for the full year."
The average high-tech financing round was $2.29m, compared to $4.04m in the second quarter of 2008 and $2.85m in the first quarter of 2009. Seventy-four companies attracted more than $1m each. Of these, 13 companies raised $5m to $10m each, and four companies raised $10m to $20m each.
In the second quarter of 2009, Israeli venture capital funds invested $113m in Israeli companies, 30 per cent below Q2 2008 levels of $161m, but seven per cent higher than the previous quarter's $106m. In the first half of 2009 Israeli VCs invested $219m in Israeli companies, a 48 per cent decrease from the $423m invested by Israeli VCs in H1 2008. The sharp fall in investment activity will undoubtedly have an impact on the number of start-ups that will be able to operate in Israel in the future.
Israeli venture capital funds accounted for 40 per cent of the total amount invested in Israeli high-tech in Q2 2009, compared to 35 per cent in the second quarter of 2008. The remainder of capital came from foreign investors as well as from non-VC Israeli investors.
Even though the proportion of investments between Israeli and foreign investors has been maintained, total amounts invested in Israeli high-tech companies have decreased by 50 per cent compared to the previous year.
First investments accounted for 38 per cent of total dollar investments by Israeli venture capitalists in the second quarter and 34 per cent in the first half of 2009, compared to 22 per cent and 35 per cent in the second quarter of 2008 and H1 2008, respectively. The average first investment by Israeli venture capitalists was $2.87m, while the average follow-on investment was $0.83m.