Money Tree survey: Investment in Israeli high tech sags 46%
Israeli startup companies managed to raise only $189 million for Q3, against $364 million in the previous quarter – a 22% drop as compared with the same quarter last year. Only 44 companies held financing rounds; only 5 raised more than $10 million
The Money Tree survey for the third quarter shows VC investments in Israeli high tech are sagging by 46% as compared with the previous quarter which constitutes a 20% decline as compared with the same quarter in 2010. Israeli startup companies raised an aggregated $198 million in the third quarter of the year as compared with $364 million in the second quarter and $253 million in the same quarter last year.
The number of companies which held financing rounds was relatively low in the quarter: only 44 companies as compared with 76 companies in the previous quarter and 68 in the same quarter last year. The number of rounds which made it past the $10 million threshold dropped as well: from 13 in second quarter to only 5 in the third quarter.
"The decline stems partially from the summer months in which investments slow down anyhow", explains Rubi Suliman, an assurance partner and technology co-leader at PwC Israel which conducts the survey. "However, the main cause for the steep declines is the difficulties in raising money from many of the funds, the slowdown in global acquisition activity, the US credit downgrade and its implications and the crisis in Europe. The number of Israeli funds and their activity is on the decline and the foreign funds operating in Israel are not filling the gap".
"In the US we also see a 12% decline in VC investments for the third quarter as compare with the second quarter. American funds are experiencing difficulties in raising later stage funds, the offering market is at a standstill and the US capital market is fickle. Israeli fund investors are mostly the same ones which invest in American funds which is why the Israeli market is feeling stronger shockwaves as foreign investors prefer to slash their foreign investments first".
"In the current foggy conditions ,it's hard to tell when investments will be back to their $300 million a quarter level", says Suliman. "However, with a number of additional exits, a rebound of the offerings market and continuing rises in global markets, especially in the US, may take us back to high investments and more important, enable Israeli funds to raise later stage funds".
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