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.
Q1 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.