Sure, Israel is known the ‘Startup Nation’, but judging by the actual venture capital investments raised by Israeli startups in the last decade, Israel looks more like a continent. Israeli startups have raised $11.1 Billion dollars in the period of 2001-2010, says Globes in an article published today. The amount was calculated by the Israel MoneyTree Report for 2001-2010, conducted quarterly by PricewaterhouseCooper Israel. The report doesn’t specify how much money was generated from the exits in these investments.
The MoneyTree report is a quarterly study on investments in Israeli high-tech companies backed by venture capital firms. The report is used widely by venture capital funds and other financial institutions in Israel and worldwide [click here for historical MoneyTree reports]. According to the latest report, Israeli startups have raised $884 million in venture capital in 2010, an increase of 20% compared to 2009, but 37% less than 2008.
The report also found a sharp fall in the number of funds active in Israel over the past decade, however it seems that the proportion of investment by foreign venture capital funds has grown for the period. Amongst the active Israeli venture capital funds, investments in companies outside of Israel has grown too. According to PWC, this may be a sign that Israeli investors are not finding enough investment opportunities in Israel.
Robi Suliman, partner in PWC’s high-tech practice in Israel told Globes:
“The past decade was a crazy rollercoaster ride for the various high tech players. From the burst bubble at the beginning to credit crisis towards the end, Israeli high tech know-how had breathtaking ups and downs.”
Early stage investments in Israel have dropped as well, compared to investments in more mature businesses. The Q3 2010 report showcased on VC Cafe showed that the percentage of Israeli venture capital funds making no investments was as high as 46% in Q3 of 2010, and 42% in the previous quarter, showing that almost half of the funds that have the money, prefer not to invest it. Which begs the question, are there too many dollars chasing too few ideas or is this just a result of the shrinking domestic venture capital industry in Israel? Should the fee structures (2% management fees regardless of investment and 20% carry in most cases) be revised for funds that make no investments at all?