A total of 312 Israeli high-tech companies attracted USD967m from local and foreign investors in H1 2013, slightly above the USD962m raised by 270 companies in H1/2012, but almost eight per cent down from USD1.05bn invested in 286 companies in H1/2011.
One hundred and eighty-four VC-backed deals attracted USD763m or 79 per cent of the total raised in H1/2013. This amount is 20 per cent higher than the USD638m raised in VC-backed deals in H1/2012.
The average company financing round was USD3.1m, while the average financing round for VC-backed deals was USD4.2m.
In Q2/2013, 143 companies raised USD493m, up four per cent from USD474m raised by 169 companies in Q1/2013 and three per cent from USD477m attracted by 129 companies in Q2/2012.
Sixteen companies attracted more than USD10m each, accounting for 52 per cent of the total amount raised in the quarter.
Eighty-five VC-backed deals attracted USD399m or 81 per cent of the total amount raised in Q2/2013. This compares with 77 per cent in Q1/2013 and 67 per cent in Q2/2012.
The average company financing round was USD3.5m, while the average financing round on VC-backed deals was USD4.7m.
"The second quarter of 2013 ended on a strong note for Israeli high-tech companies, which managed to raise nearly half a billion dollars in the first half of the year. It is interesting to note that more than 60 per cent of financing rounds were with the participation of Israeli VC funds, despite the fact that the Israeli VC share in capital invested declined," says Koby Simana, IVC Research Center’s chief executive. "Analysing the data beyond the direct investment perspective, shows that local funds play a major role in driving high-tech financing deals forward, even when the bulk of capital is sourced from foreign investors.”
In H1/2013, Israeli VC fund investments accounted for USD265m or 27 per cent of the total amount invested. The share is unchanged from H1/2012, but is well below the 35 per cent of H1/2011.
First investments captured USD94m or 35 per cent of total investments, compared with 29 per cent and 24 per cent in H1/2012 and H1/2011, respectively. Follow-on investments by Israeli VC funds in the period accounted for the remaining 65 per cent.
In Q2/2013, only USD118m (24 per cent) was invested by Israeli VC funds, the lowest quarterly amount in three years. This compares with the USD147m (31 per cent) invested in Q1/2013 and USD131m (28 per cent) invested in Q2/2012.
First investments in Q2 were USD32m (27 per cent of total investments), a 48 per cent decline from the USD62m (42 per cent) of Q1, but about 2 and a half times the USD13m (10 per cent) of Q2/2012. Follow-on investments by Israeli VC funds accounted for 73 per cent.
In Q2/2013, the life sciences sector attracted the largest share of quarterly investments for the fourth time in three years. Thirty-three companies raised USD121m (25 per cent of total investments), a 33 per cent increase from USD91m (19 per cent) raised in Q1/2013, and a slight rise from USD120m (25 per cent) raised in the year-earlier period. The internet sector followed with USD87m or 18 per cent.
Ofer Sela, partner in KPMG Somekh Chaikin’s technology group, says: "The uptick in investments in the second quarter reflected in part relatively robust activity in the medical devices segment. Yet, more than two years after the launch of the Israeli government initiative to promote investments in the life sciences, the sector as a whole is still not showing the expected results (although we believe new investors have been brought to the Israeli market and have provided some stimulation to the overall life sciences industry).
“Israel is clearly falling behind the US in the relative level of biotechnology investments. Few of the most remarkable success stories of technology transfer from Israeli research institutions have been in biotech. While the risk in this industry is obvious, overall returns are still considered very rewarding. The Israeli government needs to continue to intervene in order to create the right ecosystem for Israeli biotech companies to flourish and prosper, as it did with the venture capital industry in the early ’90s."
Thirty-two seed companies raised USD27m (five per cent) in Q2/2013, a decrease of 13 per cent from USD31m raised by 53 companies in the previous quarter, but 29 per cent above the USD21m (five per cent) attracted by 31 seed companies in Q2/2012.
