Israeli VCs Make Less and Smaller First Investments in 2009

The IVC research center has released the Summary of Israeli High-Tech Company Capital Raising for Q1 2009. $265 million were raised by start ups in the first quarter of 2009 from both local and foreign funds. This represents a decrease of 33% compared to Q4 2008.

ivc-q1-2009Q1 2009 was the lowest quarter recorded in the last three years, but it shouldn’t come as a big surprise that investment level is down significantly. The amount raised was 57 % below that raised by 135 companies in the year-earlier period (which was the highest in seven years) and 33% below the amount raised by 109 companies in Q4 2008. 

According to Koby Simana, CEO of IVC Research Center:

“The ramifications of the economic slow-down are being felt in Israel as we anticipated. The decrease is similar to that being experienced in the rest of the world, and as a result, we believe that Israeli high-tech companies’ capital raising will not exceed $1 billion in 2009.” 

Not only the number of investments declined, but also their size: The average financing round was $2.85 million, compared to $4.57 million in the first quarter of 2008 and $3.61 million in the previous quarter.

Israeli VC Fund Investment Activity

An interesting finding is that  only 40% of the total amount invested in Israeli high-tech was contributed by Israeli funds.  The remainder of capital came from foreign investors as well as non-VC Israeli investors. The Israeli share of investments went slightly up from the 2008 average of 38%.

In the first quarter of 2009, Israeli VC funds invested $106 million in Israeli companies, 60% below the amount invested in the first quarter of 2008, and 30%  below investments made in the previous quarter.

First investments by Israeli VC funds are down from 42% in Q1 2008 to 29% in Q1 2009. The total dollar investments in the first quarter shrunk, reaching an average first investment by Israeli VCs of $3.05 million,while the average Follow-on investment was $1.03 million.

Capital Raised by Sector and Stage

  • Communications  -$91 million or 34% of capital raised
  • Software – $56 million or 21 %
  • Life Sciences-  $50 million dollars or 19 %

Seed companies were only 5% of the total amount raised in Q1 2009, attracting $13 million, compared to $35 million raised by 27 companies in the equivalent period a year before. This is another indication that seed activity has slowed considerably over the past year.

Eze Vidra
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Eze Vidra

Chief Innovation Officer at Antidote
Eze is the Chief Innovation Officer at Antidote, a startup helping patients search and match to clinical trial, to accelerate medical breakthroughs. Previously, Ezewas a General Partner at Google Ventures Europe. Before GV, Eze founded and led Campus London, Google's first physical hub for startups, and was the Head Google for Entrepreneurs in Europe. He's an experienced product manager and startup mentor. In 2012 Eze founded Techbikers, a non-for profit supporting children education in developing countries.
Eze Vidra
Follow me

Eze Vidra

Eze is the Chief Innovation Officer at Antidote, a startup helping patients search and match to clinical trial, to accelerate medical breakthroughs. Previously, Eze was a General Partner at Google Ventures Europe. Before GV, Eze founded and led Campus London, Google’s first physical hub for startups, and was the Head Google for Entrepreneurs in Europe. He’s an experienced product manager and startup mentor. In 2012 Eze founded Techbikers, a non-for profit supporting children education in developing countries.