The improvement in economic and security was a favorable factor. A window of opportunity for Nasdaq issues emerged, despite the draconian provisions of the Sarbanes-Oxley Act in the US. Foreign companies made quite a few acquisitions in Israel, and venture capital funds expands their activities here. Benchmark Capital finished raising $250 million, and Sequoia Capital finished raising $200 million. Greylock opened an office in Israel headed by Erez Ofer, and Venrock Associates opened an office led headed by Ohad Finkelstein. Other new offices included those opened by BlueRun Ventures, run by Yossi Hasson; Vantage Point Venture Partners (Shai Beilis and Nir Linchevsky); and Canaan Partners (Izhar Shay).
On the other hand, the survival of the fittest process wreaked havoc among funds in Israel over the past year. Concord Ventures failed to raise a follow-on fund for the second straight time, the partners in Israel Seed Partners decided to dissolve their fund and go their separate ways, and Evergreen Partners secondary fund Harvest Fund and Tamar Technology Venture Fund dropped out of the race.
Investment boutique LEAP Capital , managed by former Bear Stearns managing director for Israel Gerald Segal, has conducted the first study of Israeli high-tech and venture capital activity. LEAP says that 99 start-ups raised $890 million in 2005, compared with $855 million raised by 107 companies in 2004. As usual, the communications sector accounted for the largest share of the market — $328 million, 38% of the total. Medical equipment start-ups raised $147 million, 16% of total investment, and software companies raised $126 million — 14%. Chip industry companies raised 12% of investments, and biotechnology start-ups 11%.
According to LEAP, Pitango Venture Capital was the most active fund in 2005 with 20 investments, and led the financing round in eight of those investments. Next on the list is Gemini Israel Funds, with 10 investments, followed by Star Ventures with nine, Jerusalem Venture Partners with eight, and Carmel Ventures with seven.
Sequoia was the most active foreign player, with seven investments; it led the financing round in three of those investments. Other foreign investors who made more than one investment included Accel Partners, Benchmark Capital, Azure Capital Partners, Duchossois Technology Partners, OrbiMed Advisors LLC, and Lightspeed Venture Partners.
Mergers and acquisitions (M&A) in Israel in 2005 totaled $12.1 billion, compared with $1.7 billion in 2004 and an all-time record of $13.8 billion in 2000. As s in 2000, when Lucent Technologies (NYSE: LU) acquired Chromatis Networks for $4.8 billion, a single deal accounted for the majority of the M&A total in 2005 Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) acquired IVAX Corporation for $7.4 billion.
raising a total of $557 million. Seven of these were floated on the Alternative Investment Market (AIM) in London, and six on Nasdaq. Including companies whose core business is non-technological, 22 Israeli companies raised $961 million. Capital raised by Israeli companies in secondary issues totaled $730 million, including $220 million by Syneron Medical Ltd. (Nasdaq: ELOS) and $213 million by NICE Systems (Nasdaq: NICE; TASE: NICE).