Seventeen companies attracted more than $10 million each, accounting for 50% of the total amount raised in the quarter.
Ninety-nine VC-backed deals attracted $364 million equal to 77% of the total amount raised in Q1 2013. This compares with 77% in Q4 2012 and just 66% in Q1 2012.
The average company financing round was $2.8 million, while the average VC-backed deal financing round was $3.68 million.
According to Ofer Sela, partner in KPMG Somekh Chaikin’s Technology group, "The majority of funding during the first quarter of 2013 was allocated to companies already generating revenue in businesses where feasibility was already proven. Most funding to companies at that stage was directed to the software and Internet sectors.
"This reflects the cautiousness of investors nowadays and is in contradiction to the concept that 'if you build it, they will come'. Investors are forcing entrepreneurs to bootstrap for a longer period and to have proof-of-concept before committing to a significant investment."
Israeli VC fund investment activity
Israeli VC fund investments accounted for $147 million in Q1 2013, 5% above the $140 million invested in Q4 2012 and 18% up from $125 million invested in Q1 2012.
In Q1 2013, $62 million (42%) was directed toward first investments – a decrease of 7% from $67 million (48%) in Q4 2012 – while in Q1 2012 $61 million (49%) was for first investments. Follow-on investments by Israeli VC funds in the quarter accounted for 58% of total investments.
"The increase in Israeli VC fund activity in the first quarter of 2013 is a direct result of capital raising by the funds in 2012," said Koby Simana, IVC Research Center’s CEO. "Capital raised by a number of veteran fund management companies, together with new players in the micro-VC niche, has increased capital available for investments, as described in our recently published Israeli Venture Capital Fund Raising report for 2012.
"Several funds are currently in advanced stages of capital raising. As a result, we expect the overall amount of capital to grow, expanding Israeli VC fund investments in local high-tech companies, and even possibly increasing their share of investments in the industry."
Capital raised by sector and stage
In Q1 2013, the software sector attracted the largest share of investments for the first time in four years. Thirty-four software companies raised $136 million (29%), compared with $105 million (21%) and $107 million (22%) in Q4 2012 and Q1 2012, respectively. The Internet sector followed with a 22% share of investments.
"The current year opened with a very strong quarter for the information technologies and software sector, with a record high level of investments both in amount invested and number of transactions made," noted Ofer Sela, of KPMG.
"This sector, traditionally one of the backbones of the Israeli high-tech industry, is mainly being propelled by cloud based enterprise applications and IT security."
Fifty-three seed companies raised $31 million (7%) in Q1 2013, a 37% decrease from $49 million raised by 53 companies in the previous quarter and 6% below $33 million (7%) attracted by 41 seed companies in Q1 2012.