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Israel venture capital survey Q3/2005 21/11/2005. Source: IVC Research Center.
 Israeli high tech capital raising was stable over the first nine months of the year, despite a 13 per cent drop in Q3 figures, says the IVC Research Center. Around 10 per cent of capital invested was directed to seed companies.
In Q3 2005, 90 Israeli high-tech companies raised $336 million from venture investors - both local and foreign (Chart 1). The amount was down 13 percent from the $387 million raised by 98 companies in the previous quarter and was 23 percent lower than the $438 million raised by 113 companies in the third quarter of 2004.
"Despite the apparent drop," said Efrat Zakai, Director of Research at IVC, "capital raised in the first nine months of 2005 indicates stability in capital flow relative to 2004 figures." In the first nine months of 2005, capital slipped only slightly to $1.07 billion from $1.10 billion in the same period of 2004. "For the full-year 2005 we foresee stability in investments, leading to approximately $1.4 billion in capital raised annually" said Zakai.
The average company financing round was $3.73 million in Q3, compared with $3.94 million in the previous quarter and $3.87 million in the third quarter of 2004. Sixty-six companies attracted more than $1 million. Of these, 15 companies raised between $5 million and $10 million each, four companies raised between $10 million and $20 million each and one company raised more than $20 million.
Israeli VC investments
In Q3, Israeli VCs invested $188 million in Israeli companies, compared with $163 million invested in the previous quarter and $194 million in Q3 2004. The Israeli VC share of the total amount invested in Israeli high-tech companies rose to 56 percent, from an average of 42 percent over the past five years.
First investments made by Israeli VCs were 41 percent of total VC investments, which compares with 40 percent in the previous quarter and 54 percent in the third quarter of 2004. The average First investment made by Israeli VCs in Q3 2005 was $2.75 million, and the average Follow-on investment was $0.92 million.
Israeli VC investments in foreign companies
Israeli VCs invested $20 million in eight foreign companies during Q3 2005, down sharply from the $30 million invested in foreign companies in the previous quarter and $23 million invested in the third quarter of 2004. Two of the 8 investments were First investments.
Capital raised by sector
The Communications sector led capital raising in both the third quarter and the first three quarters of 2005. Thirty-one Communications companies attracted $112 million, 33 percent of the total amount raised. The amount compares with $136 million (35 percent) in the previous quarter and $121 million (28 percent) in Q3 2004.
The Software sector followed with 16 companies raising $55 million (16.5 percent of total capital raised). While the Software sector accounted for 18 percent of capital raised in the first three quarters, the sector was outpaced by the Life Sciences for that nine-month period.
Life science capital raising slowed in the third quarter to $53 million, accounting for 16 percent of total capital raised, compared to 24 percent in the second quarter and 21 percent in Q3 2004. The Life Sciences succeeded, though, in keeping its position as the second most attractive Israeli sector in the Q1-Q3 2005 period, attracting 22 percent of the capital raised.
Capital Raised by Stage
Thirteen Seed companies attracted $34 million, 10 percent of the total amount raised in Q3. The amount was a significant jump from the $22 million or six percent raised in Q2, and a slight drop from $36 million (8 percent) in Q3 04. Within Seed companies, three Communications firms attracted 30 percent of the investments, and two life science firms captured 27 percent. During the first three quarters of the year, Seed companies attracted eight percent of the total funds, compared with six percent in Q1-Q3 2004.
The IVC Research Centre is Israel's leading research centre specialising in analysis and monitoring of Israel's high-tech and venture capital industries. IVC's publications are used by major financial entities and government organizations in Israel and abroad. A comprehensive quarterly report based on survey results is available to IVC clients. For more details about VCs & High-Tech industry in Israel, please visit our website www.ivc-online.com or contact Koby Simana Tel: 972-3-640-2306. koby@ivc-online.com
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