The Kesselman & Kesselmam Pricewaterhouse
Coopers Money Tree Survey, which also tracks the activities of
venture capital in Israel reports similar developments and also
points out that Q4 2000 marked a decline, for the first time in
eight quarters in venture capital investments in Israel.
This report mentions that local funds infused $343.4 million, while
the balance was invested by foreign venture capital funds as well as
by a wide range of investors not operating through venture capital
funds. These figures support our reports as published in the Israel
High-Tech Investment Report of many large investments by foreigners
in Q4 2000.
Zeev Holtzman, chairman of Giza Venture Capital and a prominent
leader of Israel's venture capital industry had predicted the
downturn in activity a number of months ago. He now points out that
had it not been for several rounds of financing initiated in Q3,
total investments in Q4 would have been drastically reduced. Holtzman
added: "Like the slowdown that we foresaw for the fourth quarter of
2000, we expect that the first quarter of 2001 will continue to show
a pattern of decline."
A recent article in Israel's respected daily Haaretz suggested that
"in the VC world, the big dilemma now is what to do with the $3
billion cash pool that VCs have to spend, when the industry's forte
-- telecom and internet infrastructure -- is now on such shaky
ground. However, even the strong funds know that it will now take
much longer to examine a company's ability to stake its place in the
market. Exits will take longer too. Also, venture capitalists quietly
say, that the weaker Israeli VCs are simply afraid to invest these
days. The talk in Tel Aviv is that seed investments are tapering off.
Still, several early-stage financing rounds over the past month for
Israeli telecom-related startups, such as Mobixell, Foxcom Wireless,
and Commil, indicate that the market is not dead. In fact, the hard
times may even change it for the better", stated the Haaretz item
During the fourth quarter of 2000, 154 private Israeli high tech
companies raised $813.million from venture capital investors, both
local and foreign. This figure is 24% lower than the amount raised by
companies during the third quarter, which totaled $1.1 billion, but
is 137% higher than the amount raised in the parallel quarter of
1999, which totaled $343 million. These figures were cited in a
quarterly survey conducted by IVC-Online, covering capital raised by
private Israeli high tech companies, in which at least one Israeli
venture capital fund participated. The number of VCs which
participated in the survey during the fourth quarter rose from 78 to
84.
