Israeli VC Funds Struggled to Raise in 2009

The latest IVC report shows that Israeli VC funds were able to raise only $229 million in 2009, a staggering 72% less than $803 million raised in 2008 and the third lowest amount raised per annum in the last decade.

Only three Israeli venture capital funds completed their fund raising efforts in 2009:

• Sequoia Capital Israel, announced final closing of Sequoia IV, a $200 million vintage 2009 fund.
• TriVentures II, a $25 million medical device fund (with American medical technology company Medtronic Inc. as its main investor)
• Startvest 09, the Targetech Innovation Center’s new fund, which raised $3.7 million

In 2010, the capital available for investment in first round and follow on rounds now stands on $1.2 billion (net management fees and operational expenses). Of that, IVC believes that $400 are already committed for first investments and

Koby Simana, IVC CEO, said:

“foreign institutional investors – who before the crisis had been the lead source of capital invested in Israeli funds – have suffered serious losses due to the credit crunch. These losses have reduced capital available for investments. The decrease in capital raised by Israeli venture capital funds reflects a global trend. In 2009 for example, US venture capital funds suffered a 48 percent decrease in their fund raising efforts, compared with capital raised in 2008.”

A sign of the times or lack of performance?

A report by the California Public Employees’ Retirement System (CalPERS) released this week (see Globes), showed that most Israeli venture capital funds had negative performance in Q3 2009. The Carmel I Fund, raised in 2000, had the highest performance, giving an internal rate of return (IRR) of 8% and a positive multiple of 1.4.  Other funds, including Apax Israel II, Israel Seed IV and JVP showed negative IRRs of 20-30%.

Capital Raised by Israeli VC funds by Vintage Year* ($B) 2000-2010(E)