Capital raising by high tech Israeli companies totalled USD3.2 billion in the first nine months of 2015, and is expected to surpass 2014’s total by year end, according to a new report by the IVC Research Centre and KPMG.
The third quarter of 2015 concluded with USD1.1 billion raised by 165 Israeli high-tech companies. The amount was marginally below the USD1.14 billion raised by 181 companies in Q2/2015, but 55 per cent above USD703 million attracted by 170 companies in the third quarter of 2014.
Koby Simana, CEO of IVC Research Center, says: "The third quarter of the year tends traditionally to be on the slow side for capital raising, so we expected to see a slight drop from the previous quarter’s records, yet capital raising is still going exceptionally strong, which is why this drop is marginal at best. We expect the fourth quarter trend to go up again, and believe 2015 may end with as much as USD4.4 billion in total capital raising by high-tech companies."
In Q3/2015, VC-backed deals reached a record USD908 million (83 per cent) invested in 100 deals. The amount was 70 per cent above the USD534 million raised in 101 VC-backed deals in Q2/2015 which was at an all-time low – 47 per cent of high-tech capital raising, and 92 per cent more than USD474 million or 67 per cent of total, closed in 97 deals in Q3/2014.
The average VC-backed deal in the third quarter was USD9.1 million, close to the USD9.3 million record average in Q1/2015, and much higher than USD5.3 million and USD4.9 million average VC-backed deals in Q2/2015 and Q3/2014, respectively.
One of the continuing trends the IVC-KPMG Survey points to is the ever-increasing prominence of large deals of USD20 million or more. There was a significant increase in the number of such deals in Q3/2015, with 20 deals reaching a staggering total of USD703 million, making up 64 per cent of the total capital raised in the third quarter.
According to Simana: "The fact that an average Israeli large financing accounted for the USD35 million in the previous quarter, reveals that even Israeli growth-stage companies are priced well within the lower range of growth deals in comparison with other countries. We are far from Silicon Valley’s USD0.5 billion financing rounds, even while we do find the occasional USD100 million round here as well, but in general large deals in Israel are affordably-priced, reflecting real, rather than speculative, valuations."