Israel’s venture capital funds raised $1.02 billion last year for investment in startup companies – a figure that may still grow by $500 million to the highest total in many years, the IVC Research Center and accounting firm KPMG said in a survey released Tuesday.
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Israeli VC funds raised less than the $1.21 billion they did in 2014, but at the end of last year many of them were still in the process of raising new capital, and the final total for what IVC called “vintage 2015” funds could reach $1.5 billion if they meet their targets. Eighteen new funds were formed last year, 13 of which were still raising capital into 2016, IVC said.
It said that for 2016, 12 VCs had started raising a targeted $1 billion from investors, which would make this year too one of the best of the last decade.
Despite the high levels of fundraising, Ofer Sela, a partner in KPMG Somekh Chaikin’s technology group, said VC funds continued to rely on foreign investors for capital rather than tapping Israeli sources.
“While Israeli institutional investors have expanded their involvement beyond what it had been in the past, they still leave the arena mostly to investors from the U.S., and increasingly, from China,” he said.
But according to Sela, “We can also see Israeli high-net-worth individuals going into VC investments. We hope this changing trend will get even more institutional investors involved in the industry, either as limited partners in funds or co-investors in financing deals.”
Venture capital fundraising is traditionally measured in cycles, with the sixth one for the Israel industry ending in 2014 and the current one starting last year. The sixth cycle raised a combined $3.6 billion, up from $2.4 billion in the fifth, which ran from 2007 to 2010.
A fund’s vintage year is set by when it begins its first investments, even if it continues raising money as 13 "vintage 2015" funds are doing.
Four veteran fund managers accounted for close to 60% of all the capital raised, with 83North, formerly known as Greylock Israel, taking in $204 million for its third fund, IVC said. Pontifax raised $150 million and Pitango raised half of a planned $250 million. Vintage raised $125 million for its eighth fund, half dedicated for investment in other Israeli funds.
IVC said there had been a change in the kind of funds raising money. In the previous cycle, micro funds that raise relatively small amounts of capital were very popular. In 2015, however, six of the newly formed funds said they were focusing their investments on more mature, growth-stage startups.