The latest IVC Online report is out and it offers interesting color on the funding of Israeli startups. According to the report, 137 startups raised $522 million in Q3 of 2011, up 53% from the equivalent period in 2010, but down 8% from the $549 million raised in Q2 2011. Since the beginning of 2011, 422 Israeli startups raised $1.57 billion – Up 71% from the equivalent period a year ago.
Israli VC Fund investment activity is on the decline – Israeli VC invested $96 million in Israeli companies in Q3 2011, 40% below the previous quarter (which represented a three year high). Since the beginning of 2011, the Israeli VC fund share of total investment was 25 percent, a decrease from 30 percent in the previous year. This represents a weakening of Israeli funds compared to their foreign competitors. Recently several funds increased their funding activity in Israel including Index Ventures (who has partner Saul Klein living in Israel), Greylock Ventures (who raised a $150 million fund dedicated to Europe and Israel) and Innovation Endeavors (who added Doron Alter to focus on Israeli investments this year). There are also the incumbent funds including Sequoia, Battery, Benchmark and so on, who have local reps in Israel.
Koby Simana, CEO of IVC Research Center, said:
“Data for the first three quarters of 2011 indicates investment activity at the high levels of 2008. However, one big difference is the mix. The share of Israeli VCs has markedlydeclined, while foreign investors have strengthened their presence in the Israeli market.”
The Internet sector took the top spot in attracting investment in so far in 2011, for the first time in 4 years, reaching $348 million (22% of total investments) in the first three quarters of this year.
Mid stage companies led capital raising – as in the 2010 period – with $702 million or 45% in the first three quarters of 2011. Seed funding attracted 5% compared to 3% in 2010, but despite the increase, still remains a concern as most of the money keeps flowing to experienced companies/entrepreneurs.
The chart below shows the fundraising in Israel by stage of investment: