Israeli Tech Fundraising Down From a Year Ago, but Trend Is Still Positive

Israel Venture Capital Research Center says Israeli startups nabbed $1.26 billion in the second quarter of 2017, down 26% year from last year

File photo: Hi-tech workers.
Bloomberg

Israeli high-tech companies raised $1.26 billion in the second quarter, down 26% from a year earlier but still the second-highest total ever, Israel Venture Capital Research Center reported on Wednesday.

Moreover, the figures pointed to positive trends for the high-tech industry as the number of late-stage deals with big rounds increased, confirming a trend by startups to stay the course and not sell themselves at an early stage. Twenty-one companies raised $20 million or more during the quarter, accounting for 55% of all the capital raised, said IVC, which published the report with the law firm, Zysman Aharoni Gayer & Co.

“The figures indicate a real change in the way capital is being raised in the local market: Investors, especially venture capital funds, are choosing to make fewer investments but are prepared to invest larger amounts per round, at almost any stage,” said Koby Simana, CEO of IVC Research Center.

By the same token, the youngest tech companies enjoyed a surge in new investment. A total of 38 seed-stage companies raised $65 million, compared with $35 million in the first quarter and $41 million a year ago.

“These data indicate that our forecast, which predicted that the Mobileye deal would have an impact in the following quarters, driving up fundraising by affirming the quality of Israeli companies, has come true,” said Shmulik Zysman, managing partner at the ZAG law firm.

Intel agreed in March to buy Mobileye, an Israeli maker of self-driving-car technology, for $15.3 billion, making it the biggest acquisition ever of an Israel tech company. The Israeli tech industry has not only benefited from heightened interest in auto-tech but in cybersecurity and big data, where Israeli startups also excel.

Moreover, the U.S. industry saw a revival of tech fundraising in the second quarter. Last week, the accounting firm KPMG said venture capital investment rose substantially in the second quarter from the first to $21.8 billion, though the figure was down from a year ago.

The IVC figures also showed that the life science industry was poised for a record year in capital raising. Although it was only the second-largest sector after software in term of fundraising, the sector nabbed an unprecedented $622 million in the first half of 2017, an increase of nearly one third from a year earlier, IVC said.

If there were any worrying signs for the industry, it was a faint signal that the growth in fundraising was plateauing, albeit at much higher levels than in the years before 2014 when growth got underway.

In the first half, 312 tech companies raised $2.3 billion, down from 368 companies and $2.8 billion the same time in 2016. The number of rounds was 8% lower than the six-month average of the last four years, IVC noted.