13 percent rise in high-tech financing in Q3 2006
IVC survey indicates 87 Israeli high-tech companies raised USD 381 million in third quarter of 2006. In comparison to previous quarter, it is a 6 percent drop. Life sciences sector reaches first place with USD 115 million, 30 percent of activity
A report by the IVC Research Center indicates that in the third quarter of 2006, 87 Israeli high-tech companies raised USD 381 million from venture investors – both local and foreign.
The quarterly amount was down 6 percent from the USD 404 million raised in the previous quarter, but was 13 percent above the USD 336 million raised in the third quarter of 2005.
According to the report, the average company financing round was USD 4.37 million in third quarter, compared with USD 3.7 million in the previous quarter and USD 3.73 million in the third quarter of 2005. Sixty companies attracted more than USD 1 million.
Of these, 17 companies raised between USD 5 million and USD 10 million each, 12 companies raised between USD 10 million and USD 20 million each, and one company raised USD 20 million. The most active sector was the life sciences sector with USD 115 million, which was 30 percent of the total financing.
Israeli VC investment activity
In the third quarter, Israeli VCs invested USD 142 million in Israeli companies, compared with USD 154 million invested in the previous quarter and USD 188 million in third quarter 2005. The Israeli VC share of the total amount invested in Israeli high-tech was 38 percent, with the remainder of capital coming from foreign investors as well as non-VC Israeli investors.
First investments accounted for 44 percent of total dollar investments by Israeli VCs in the third quarter, compared with 35 percent in the previous quarter and 41 percent in the third quarter of 2005. The average First investment by Israeli VCs was USD 2.25 million, while the average follow-on investment was USD 0.85 million.
In the first three quarters of 2006, the Israeli VC fund share of investments in Israeli high-tech companies was 41 percent, compared to 49 percent in the corresponding period in 2005. The share of foreign investors as well as non-VC Israeli investors increased, therefore, to 59 percent from 51 percent.
Israeli VCs invested USD 12 million in six foreign companies during third quarter of 2006, compared to USD 8 million invested in foreign companies in the previous quarter and USD 30 million invested in the third quarter of 2005.
Capital raised by stage
Fourteen seed companies attracted USD 20 million, 5 percent of the total amount raised in third quarter, compared to USD 14 million (3 percent) in the previous quarter and USD 34 million (10 percent) in the third quarter of 2005.
Within seed companies, three communications companies attracted 58 percent of the investments and six software companies captured 22 percent. During the first three quarters of the year, seed companies attracted seven percent of the total funds, compared with eight percent in first quarter to third quarter of 2005
“The small decrease in investment in third quarter indicated that the war, which took place during the third quarter, had only a very minor impact on venture capital investments,” said Zeev Holtzman, chairman of IVC Research Center.
“It signifies that investors continue to see stability and credibility in Israeli high-tech, a fact which is also reflected in the slight increase in the share of foreign investment during the third quarter period,” he said.
Efrat Zakai, director of research at IVC, remarked that "the first nine months of 2006 showed a 7 percent increase in capital raising to USD 1.145 billion, compared to USD 1.073 billion in the corresponding period in 2005. We expect a stable annual investment level in 2006 – for the third straight year – with approximately USD 1.5 billion in capital flow.”
