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Summary of Israeli high-tech company capital raising
Q4 2005 and full year 2005
21/03/2006. Source:IVC Research Center.
 Capital raised by Israeli high-tech companies reached $1.34bn in 2005, reports the IVC, with an 8 per cent year-to year decline due to a slow fourth quarter.
The following are the findings of the Quarterly Survey conducted by the IVC Research Center, which for more than eight years has been at the forefront of venture capital and private equity research in Israel. This Survey, conducted in cooperation with the Israel Venture Association (IVA), reviews capital raised by private Israeli high-tech companies from Israeli venture capital funds and from other investors. The Survey is based on reports from 89 venture investors of which 56 are Israeli management companies and 33 are other - mostly foreign - investment entities. The complete survey will be published in the IVA 2006 Yearbook.
In 2005, 378 high-tech Israeli companies raised $1.34 billion from local and foreign venture investors, an eight percent decrease from the $1.46 billion raised in 2004, but 32 percent above 2003 levels. "The eight percent decline in 2005 reflected a slow fourth quarter," said Efrat Zakai, Director of Research at IVC. "Q4 was the weakest quarter for fund raising in two years. We believe this is only a temporary decrease and project a return to earlier levels in the coming quarters."
In Q4, 88 Israeli high-tech companies raised $264 million, a 21 percent decline from the $336 million raised by 90 companies in the third quarter and a 28 percent drop from the $366 million raised by 113 companies in the fourth quarter of 2004.
Fifty-eight companies attracted more than $1 million each in Q4. Of these, six companies raised between $5 million and $10 million each, and eight companies raised more than $10 million each. The average company financing round was $3.0 million, compared with $3.7 million in the previous quarter and $3.2 million in the fourth quarter of 2004.
Israeli VC Investment Activity
In 2005, Israeli VCs invested $655 million in Israeli high-tech companies, about equal to investments made in 2004 ($665 million). The Israeli VC share of the total amount invested in Israeli high-tech companies was 49 percent, up sharply from the 42 percent average of the previous six years.
First investments made by Israeli VCs were 43 percent of total dollars invested by Israeli VCs in 2005, slightly below the 46 percent of 2004 and equal to 2003 levels. The average First and Follow-on investments were $2.42 million and $0.78 million, respectively, compared to $2.16 million and $1.07 million in 2004.
In the fourth quarter, Israeli VCs invested $131 million, 50 percent of the total amount invested in Israeli high-tech companies. This amount was 30 percent below capital invested by local VCs in the third quarter and 17 percent less than in Q4 2004.
Israeli VC First investments accounted for 40 percent of their total dollar investments in Q4, compared with 41 percent in Q3 2005, and 46 percent in the fourth quarter of 2004. According to IVC General Manager, Guy Holtzman "The composition of venture capital investments in Israel is expected to change over 2006, with an increase in foreign investment activity as the number of local players diminishes."
Israeli VC Activity in Foreign Companies
Israeli VCs invested $95 million in foreign companies during 2005 (in addition to their investments in Israeli high-tech companies), compared to $107 million in 2004 and $101 million in 2003.
Capital Raised by Sector
The distribution in capital raised among sectors has not changed markedly in the last four years. Thirty-three percent was raised by the Communications sector, 20 percent by the Life Sciences, 19 percent by Software, 11 percent by Semiconductors, four percent by the Internet and 13 percent by other sectors.
The Communications sector attracted the highest sums in 2005 as in the past six years. One hundred and twelve Communications companies attracted $469 million, 35 percent of the total amount raised, compared to $430 million (29 percent) raised in 2004 and $332 million (33 percent) raised in 2003. In Q4, 26 Communications companies attracted $101 million (38 percent) with four companies attracting over $10 million.
The Life Sciences followed with $284 million, accounting for 21 percent of total capital raised, compared to 22 percent in 2004 and 18 percent in 2003. In the fourth quarter, 27 Life Sciences companies attracted $50 million, 19 percent of the total capital raised. Within the Life Sciences, Medical Device companies attracted 65 percent of the capital raised in 2005, versus 73 percent in Q4 2005.
Capital Raised by Stage
In 2005, 52 Seed companies attracted $110 million. Seed companies captured eight percent of the total capital raised, same as in 2004. In the fourth quarter, 12 Seed companies attracted $22 million, accounting for 9 percent of Q4 capital raising, compared to $34 million (10 percent) in Q3 and $42 million (12 percent) in Q4 2004.
Mid-Stage companies (up to $10 million in reveNues) attracted the most funding in 2005, as 177 companies raised $702 million, 53 percent of total capital raised. This compares with $819 million (56 percent) in 2004. In Q4 2005, 44 Mid-Stage firms raised $164 million (62 percent), a similar amount to the previous quarter but just 49 percent of the total. The amount was 22 percent below the $210 million (57 percent) raised in Q4 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
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