Ninety-six Israeli high-tech companies raised $341 million from venture capital funds and other venture investors - both local and foreign - in the third quarter of 2010. The amount raised was similar to $343 million raised by 104 companies in the previous quarter, and 13 percent above $303 million raised by 108 companies in the third quarter of 2009. In the first three quarters of 2010, Israeli high-tech companies raised a total of $918 million, 8 percent above the $847 million raised in Q1-Q3 2009.
In Q3 of 2010, the average financing round was $3.55 million, compared to $3.3 million in Q2 2010 and $2.8 million in the third quarter of 2009.
"The data suggest a slow recovery in the local high-tech sector's ability to raise capital. The third quarter was similar to the previous quarter in terms of capital raised by high-tech companies, and essentially better than what we have seen over the past two years," says Koby Simana, CEO of IVC Research Center. "However, capital raising for Israeli VC funds has been frozen for quite a while, and therefore we expect further difficulties in future venture capital raising by high-tech companies."
Fifty-seven companies attracted more than $1 million each. Of these, two companies raised more than $20 million each, eight companies raised $10 million to $20 million each and 13 companies raised $5 million to $10 million each.
Israeli VC Fund Investment Activity
The Israeli VC share of the total amount invested in Israeli high-tech was 32 percent in Q3, with the remainder of capital coming from foreign investors as well as non-VC Israeli investors. In the first three quarters of the 2010, the Israeli VC fund share was 30 percent, compared to 36 percent in the corresponding period of 2009.
First investments by Israeli VC funds accounted for 28 percent of total investments in the third quarter, compared to 36 percent and 20 percent in Q2 2010 and Q3 2009, respectively. In the first three quarters of 2010, first investments accounted for 30 percent, equal to the 30 percent in Q1-Q3 2009.
The average first investment by Israeli VC funds in Q3 2010 was $1.94 million, while the average Follow-on investment was $1.04 million.
Israeli VC funds invested $20 million in foreign companies during Q3 2010 (in addition to their investments in Israeli high-tech companies), compared to $12 million in Q2 2010 and $18 million in Q3 2009. Three out of 11 foreign transactions were first investments.
Capital Raised by Sector
In the first three quarters of 2010, Life Science companies attracted $249 million or 27 percent of total capital raised, which compares with $210 million or 25 percent in the first three quarters of 2009. The Communications sector followed with $189 million (21 percent), and Internet was next with $151 million (16 percent).
Capital Raised by Stage
During the first three quarters of the year, Seed companies attracted $29 million, 3 percent of the total funds raised, compared to $52 million or 6 percent in Q1-Q3 2009. Early Stage (R&D) companies accounted for 33 percent, Mid-Stage companies (up to $10 million in revenues) 48 percent, and Late Stage companies 16 percent.
In the third quarter of 2010, Israeli VC funds invested $109 million in Israeli companies, 20 percent more than the $91 million invested in Q2 2010, and 22 percent above the $89 million invested in the third quarter of 2009. In the first three quarters of 2010, Israeli VC funds invested $278 million in Israeli companies, a decrease of 10 percent from the $308 million invested in the corresponding period of 2009.
The Communications sector led capital raising in Q3 2010 with $97 million or 28 percent of capital raised, followed by the Software sector with $57 million or 17 percent and the Life Sciences with $54 million or 16 percent.
Nine Seed companies attracted $3 million, 1 percent of the total amount raised in Q3, compared to $15 million raised by 17 seed companies in the previous quarter, and $14 million raised by 16 companies in Q3 2009. Early Stage (R&D) companies captured 32 percent of total capital raised, while Mid-Stage companies (up to $10 million in revenues) attracted 48 percent of total capital raised (Chart 2).