Israel: Investments up

In the first quarter of 2004, 111 Israeli high-tech companies raised $323m from venture investors – both local and foreign according to the quarterly survey conducted by the IVC Research Center. The amount was up 31% from the $246m raised by 96 companies in the previous quarter and 53 percent higher than the $211m raised by 86 companies in the first quarter of 2003.

The average financing round increased by 13% from the previous quarter and 18% from the first quarter of 2003 to $2.9m. Sixty-seven companies attracted over $1m. Of these, 11 companies each raised between $5m and $10m and ten companies each raised over $10m.

Zeev Holtzman, chairman of IVC Research, said: “Capital raised in Q1 was the highest in eight quarters. The increase is a very positive sign, indicating the strength of Israel’s high-tech industry. Figures are encouraging, especially when compared to the less positive trends in the US and Europe.”

The amount invested in foreign companies by Israeli VCs fell this quarter with $22m invested in 10 foreign companies. This compares to $33m invested in foreign companies in the previous quarter and $18m in the first quarter of 2003. Five of the 10 investments were first round investments.

Later stage companies attracted $64m in the first quarter, compared with $44m raised in the corresponding quarter of 2003. Mid-stage companies continued to dominate capital raising as they have for the last six quarters. Forty-four mid-stage firms raised $169m, 52% of total capital raised. Thirteen seed stage companies raised $13m, 4% of the total, the same share as in the previous quarter.

In terms of sector, communications companies attracted the most funds. Twenty-seven communications companies attracted $108m, 33 percent of the total amount raised, compared with 23% in the previous quarter and 37% in the first quarter of 2003. Software followed with $89m raised by 27 companies, an increase of 65% from the amount raised in the previous quarter and 134% from the first quarter of 2003. The life sciences and the Internet sector attracted $60m and $19m, respectively.