The economy slump in the US is creeping out on the venture capital investments in Israel. Kesselman & Kesselman PricewaterhouseCoopers Israel has released its latest MoneyTree report, analyzing Israeli venture capital investments in Q4 of 2007. 53 venture capital firms participated in a report that shows no growth in investments compared to the same period in the previous year.
The report shows that VC investments in Israel have remained flat from 2006 to 2007, with a large decrease in investments on the fourth quarter compared to the same period the year before. Approximately $1.2 billion were invested in Israel in high-tech companies backed by venture capital funds. That’s identical to the amount raised in 2006. However, total investments in Q4 of 2007 were down 37% as compared to the previous quarter and 33% lower as compared to corresponding quarter of 2006.
Investments per company are also down. In 2007, the average investment per company was $3.9 million, as compared to 4.1 million in 2006 and $3.4 million in 2005. In spite of the decline recorded in the final quarter of 2007, both in the number of companies raising funds and in the amount of total investment, the situation in annualized terms remained stable. 69 companies raised approximately $221 million in Q4 2007, compared to 74 and $350 million in Q3.
In terms of geography, 50% of the capital raised in Q4 2007 ($110M) was dedicated to 42 companies registered in Israel (61% of the total companies). The rest was allocated to companies registered outside of Israel, primarily in the US. It’s interesting to see that there were almost no investments in emerging markets such as China and India.
Communications and networks were the most popular segment of investments (28%), followed closely by semiconductors (23%). Life Sciences still only has a smaller chunk of the investment pie (14%) and clean tech wasn’t significant enough to own its own category. Many predict that clean tech investments in Israel will lead the table next year – I’m curious to see how this trend pans out.
Lastly, only 9% of the investments were made in the seed stage (approximately $20M), a decline of 12% compared to last year. The majority of the investments were done in the Intermediate phase, as companies prepared for early expansion (approximately $170 million, representing 77% of total investment for the quarter). I’m guessing that it has something to do with the place of the angels in the startup economy as more and more entrepreneurs seek angel investments in the early seed stages, and more and more VCs almost require such investments as a pre-requisite for a series A round.
Source: see the full pdf report here.