Israeli high-tech firms raise $660M in Q3
Total of 162 companies raise highest quarterly amount since 2000 from local and foreign investors, IVC reports. VC fund first investments increase 49% from second quarter
This is an increase of 34% from $493 million raised by 143 companies in the second quarter of 2013, and 35% from $488 million attracted by 143 companies in the third quarter of 2012.
Five companies attracted more than $20 million each, accounting for 25% of the total amount raised in the third quarter of 2013. Nine companies attracted between $10 million and $20 million each, accounting for 16% of the total quarterly amount.
One hundred and one VC-backed deals attracted $462 million or 70% of the total amount raised in the third quarter of 2013. This compares with 81% in Q2/2013 and 77 percent in Q3/2012.
The average company financing round in the third quarter of 2013 was $4.07 million, compared with $3.45 million in the second quarter of 2013. The average financing round of VC-backed deals was $4.57 million, compared with $4.64 million in the second quarter of 2013.
In the first three quarters of 2013, 474 Israeli high-tech companies raised $1.63 billion in total, a 12% increase from $1.45 billion attracted by 413 companies in the first three quarters of 2012, and 4% above $1.56 billion invested in 422 companies in the first three quarters of 2011.
Two hundred and eighty-eight VC-backed deals attracted $1.23 billion or 75% of the total invested in the first three quarters of 2013, an increase of 21% from the $1.01 billion raised in 257 VC-backed deals in the first three quarters of 2012.
The average company financing round was $3.43 million, while the average financing round for VC-backed deals was $4.26 million.
According to Ofer Sela, partner in KPMG Somekh Chaikin's Technology group, "There has been a continuing rise in the number of seed and first round financing transactions in recent years, resulting in a dramatic increase in the overall number of VC-backed high-tech companies in Israel. We see this trend continuing, leading to record number of deals in 2013 at both stages."
"Another encouraging trend reflected in year-to-date results is the growing number of mature companies that are already generating substantial revenue and are focusing their efforts on global expansion through building sales and marketing infrastructure.
"This trend is going to continue to increase the size and volume of M&As in the Israeli market, as we have recently seen. We are likewise hopeful that some of these firms will continue to expand independently, raising capital through the IPO route," Sela concluded.
Israeli VC fund investment activity
In the third quarter of 2013, $151 million was invested by Israeli VC funds, accounting for just 23% of total investments – the lowest quarterly share in a decade. This compares with $123 million (25%) invested in the second quarter of 2013 and $130 million (27%) invested in the third quarter of 2012.
First investments in the third quarter of 2013 were $52 million (34% of total investments), a 49% increase from the $35 million (28%) of the second quarter, but 9% below the $57 million (44%) of the third quarter of 2012. Follow-on investments by Israeli VC funds accounted for 66%.
In the first three months of 2013, Israeli VC fund investments accounted for $418 million or 26% of the total amount invested. This compares with $388 million (27%) in the first three months of 2012 and $488 million (31%) in the first three months of 2011.
First investments in the first three months of 2013 accounted for $145 million or 35% of total investments, compared with 34% and 26% in the first three months of 2012 and first three months of 2011, respectively. Follow-on investments by Israeli VC funds made up the remaining 65%.
"In the first three quarters of 2013, the number of financing deals was substantially larger than the same period in 2012, as a direct result of the increase in mid-stage deals in the software, Internet and communications sectors," noted IVC Research Center CEO Koby Simana.
"Interestingly, all types of investors have expanded their activity – venture capital funds, investment companies, corporate investors and angels, both Israeli and foreign. However, most of the increased activity," observed Simana, "stemmed from the stepped-up involvement of foreign venture capital funds.”
Capital raised by sector, stage
In the third quarter of 2013, 47 Internet companies attracted $179 million (27%), the largest quarterly amount for the sector since 2000. This is a 103% increase from $88 million (18%) raised by 33 companies in the second quarter of 2013, and a 180% jump
from the $64 million (13%) raised by 33 companies in the year-earlier period. The life sciences sector followed with $128 million or 20%.
Twenty-five seed companies raised $17 million (3%) in the third quarter of 2013, a decrease of 37% from $27 million (5%) raised by 32 companies in the previous quarter, and 60% below the $43 million (9%) attracted by 32 seed companies in the third quarter of 2012.
