Israel’s venture capital industry has approximately 70 active venture capital funds, of which 14 are international VCs with offices in Israel. VC funds raised $607 million in 2012. Among the leading funds, Sequoia V, Pitango VI and Magma III raised a combined sum of $450 million, 74 percent of the total raised by all Israeli VCs in 2012. Micro-VC funds continued to attract investments with six micro funds raising a total of $83 million, nearly 14% of total capital raised.
In 2011, 546 Israeli high-tech companies attracted $2.14 billion, 70% above the $1.26 billion raised in 2010, and 91% above the $1.2 billion raised in 2009.
As local venture capital; funds have found it increasingly difficult to raise new capital, foreign investors have been upping their investments, which have more than doubled in the last year. Another trend is towards large VCs initiating follow-up funds, and on the other end, small, industry-specific and/or early-stage-focused funds, a reflection of a similar trend in the US,
International Venture Capital Firms: Several leading U.S. and European VC funds have Israeli branches, namely Alta Berkeley Venture Partners, Battery Ventures, Bessemer Venture Partners (BVP), BlueRun Ventures (BRV; formerly Nokia Venture Partners), Blumberg Capital, Bridge Capital Fund (BCF) LP, Canaan Partners, Defta Partners, Lightspeed Venture Partners, Partech International Inc., Susquehanna Growth Equity (SGE) LLC, Venrock, YL Ventures, and Ziegler Meditech Equity Partners (ZMEP) LP. Additionally, there are some 220 international funds, including Polaris Venture Partners, Accel Partners and Greylock Partners, that do not have offices in Israel, but actively invest in Israel through an in-house specialist. The VC divisions of leading multinationals, among them Intel, HP, TimeWarner Inc., Sony, Cisco and others, which have opened R&D centers and acquired companies in Israel , have also found that the country offers a profitable VC market.
Between 2003 and 2012, Israel's venture capital funds attracted $6.77 billion. The capital available for investment by Israeli VC funds at the beginning of 2013 was approximately $2.1 billion. Of this ammount, $484 million (23%) is earmarked for first investments with the remainder reserved for follow-on investments.
Israeli venture capital funds invested $525 million in Israeli companies in 2011, an increase of 42% from 2010, and a rise of 28% from 2009. The Israeli VC fund share of total investment was 25%, the lowest in the last decade, when the Israeli VC share averaged 40%.
Delivering Successful Exits
Mergers & Acquisitions: In 2011, there were 85 mergers and acquisitions (of Israeli companies) in the Israeli market worth a total of $5.23 billion, a 134% increase from $218 billion in 2010 and the second highest amount in a decade, after the $10 billion worth of deals in 2006.The average deal size in 2011 increased nearly 85% to $60 million from $32.5 million in 2010. This increase reflects a relatively high number of deals above $100 million, with
M&As of Israeli VC-backed companies in 2011 totaled $12.52 billion, a 102% increase from 2010.
Investment Trends in the Israeli VC Market
In 2011, the Internet sector attracted the largest share of investments for the first time in the last decade, with $482 million or 23% of total capital raised, followed by the communications sector with $432 million or 20% and the software sector with $415 million or 19% of total capital raised. The life sciences sector also attracted investor attention with 13% of capital raised in 2011 or $75 million.
Investment by Stage
In 2011, mid stage companies led capital raising with $903 million or 42% of total capital raised. Seed companies attracted 5%, early stage companies 26% (slightly down from 35% in 2010) and mid to late stage companies raised $1.48 billion, an increase of 90% from 2010. According to KPMG, the increase in late stage investments indicates the strength of Israel's technology industry, as well as its attractiveness to foreign investors.
Source for this article: IVC Research Center