VC-backed deals in which at least one venture capital fund participated, accounted for $1.37 billion from a total of $1.92 billion raised in 2012. These venture-backed deals were down 22% from $1.76 billion in 2011.
Israeli VC fund investments amounted to $516 million in 2012, 19% below the $638 million invested in 2011.
According to Ofer Sela, partner in KPMG Somekh Chaikin’s Technology group, "The year 2012 was a record one in terms of the number of companies raising capital over the past decade.
"In early stage investments, micro-VCs and angel investors succeeded in filling the void left by Israeli VCs. The Internet sector proved, by far, to be the most attractive sector as more than twice as many early stage Internet companies were funded in 2012 than in 2011.
"Technology developments in recent years in both cloud-based infrastructure and content delivery platforms have enabled Internet companies to mature and develop their intended technology with greater capital efficiency than any other sector.”
In the fourth quarter of 2012, 163 Israeli high-tech companies raised $494 million, up 5% from $468 million raised in Q3 2012, but down 14% from $571 million raised by 124 companies in Q4 2011.
Israeli VC fund investment activity
From $516 million invested by Israeli venture capital funds in 2012, $195 million (38 percent) was allocated for first investments – up 8% from $181 million in 2011, while $321 million (62%) was for follow on investments.
Israeli VC funds invested a total of $140 million in Q4 2012, down 7% from $150 million invested in Q4 2011. First investments by Israeli VC funds in the quarter accounted for 48%, while follow-on investments accounted for 52%.
"Despite a decrease in capital raising, the figures in fact demonstrate the strength of Israel's high-tech industry," said IVC CEO Koby Simana. "In 2012, we saw investors shifting back into early stage and seed investments with a five-year record $146 million raised by 157 seed companies.
"While investment by Israeli VC funds is shrinking, foreign VCs as well as corporate and private investors are gradually increasing their activity. As a result, I'm optimistic about the high-tech industry’s chances of maintaining the current level of capital raising in the coming year."
The life sciences sector attracted the largest share of investments in 2012. One hundred and thirty four companies attracted $497 million. The amount was 28% above the amount raised by the sector in 2011.