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Q4 shows signs of recovery for Israeli high tech

Although Israeli high tech companies raised $1.1 billion less in 2001 than in the previous year, figures for the final quarter of the year showed an increase in capital raised.

The year end survey conducted by the Israel Venture Capital Research Centre (IVC) reported $2 billion of venture capital funding raised by 526 high tech companies in 2001. Despite the 36 per cent drop compared to 2000, news that the last three months of 2001 saw an increase in funding gives cause for optimism. “Q4 data indicates that the rapid decline in high tech investment in Israel has been halted and Israel’s high tech industry continues to be an attractive venue for foreign investors, ” said Yigal Ehrlich, chairman of the Israel Venture Association.

In the fourth quarter, 120 companies raised $464 million from local and foreign investors. This is 23 per cent higher than the $376 million raised by 117 companies in the preceding three months. Racheli Er-el, director of research at IVC, said: “The source of the increase in capital raised in Q4 was the greater activity by entities that are not Israeli VCs – mostly foreign investors.”

Other findings of the report included a drop in the average size of funding rounds, from $6 million in 2000, to $3.8 million last year. The number of seed financing rounds also fell, reflecting the preference of VCs to invest in more mature companies.