In Q3 2005, 90 Israeli high-tech companies raised $336 million from
Israeli and foreign venture investors. The figure was 13 percent
lower from the $387 million raised by 98 companies in the previous
quarter and 23 percent lower than the $438 million raised by 113
companies in the third quarter of 2004. In the first nine months of
2005, capital raised slipped only slightly to $1.07 billion from
$1.10 billion in the same period of 2004. "For the full-year 2005 we
foresee stability in investments, leading to approximately $1.4
billion in venture capital raised annually," reported the Israel
Venture Capital Survey
In Q3, Israeli VCs invested $188 million in Israeli companies,
compared with $163 million invested in the previous quarter and $194
million in Q3 2004. The Israeli venture capital share of the total
amount invested in Israeli high-tech companies rose to 56 percent,
from an average of 42 percent over the past five years.
First investments made by Israeli VCs were 41 percent of total VC
investments. This compares with 40 percent in the previous quarter
and 54 percent in the third quarter of 2004. The average first
investment made by Israeli VCs in Q3 2005 was $2.75 million, and the
average follow-on investment was $0.92 million.
Israeli VCs invested $20 million in eight foreign companies during Q3
2005, down sharply from the $30 million invested in foreign companies
in the previous quarter and $23 million invested in the third quarter
of 2004. Two of the 8 investments were first time investments.
The Communication sector, led capital raising in both the third
quarter and the first three quarters of 2005. 31 Communication
companies attracted $112 million, 33 percent of the total amount
raised. The amount compares with $136 million (35 percent) in the
previous quarter and $121 million (28 percent) in Q3 2004.
The Software sector followed with 16 companies raising $55 million
16.5 percent of total capital raised. While the Software sector
accounted for 18 percent of capital raised in the first three
quarters, the sector was outpaced by the Life Sciences for that
nine-month period.
Life science capital raising slowed in the third quarter to $53
million, accounting for 16 percent of total capital raised, compared
to 24 percent in the second quarter and 21 percent in Q3 2004. The
sector succeeded, however, in keeping its position as the second most
attractive Israeli sector in the Q1-Q3 2005 period, attracting 22
percent of the capital raised.
Thirteen Seed companies attracted $34 million, 10 percent of the
total amount raised in Q3. The amount was a significant advance from
the $22 million or six percent raised in Q2, and a slight drop from
$36 million in Q3 04. Within Seed companies, three communication
firms attracted 30 percent of the investments, and two life science
firms captured 27 percent. During the first three quarters of the
year, Seed companies attracted eight percent of the total funds,
compared with six percent in Q1-Q3 2004.