Rockets were coming down and sirens were blaring most of the summer as Israel fought a 50-day war with Hamas. But for Startup Nation, Operation Protective Edge had no discernible impact, with high-tech companies raising just over $700 million in the third quarter of the year.
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IVC Research Center said fundraising by startup companies was up 6% from a year earlier in the July-September quarter, to $701 million. It was down 24% from what it called an “exceptionally strong” second quarter, but CEO Koby Simana said this was a seasonal drop, and not related to the war.
“The Gaza conflict barely impacted high-tech capital raising,” he said in a statement. “Traditionally, the third quarter tends to be the weakest for capital-raising in any given year, but third-quarter 2014 ranked as the third best quarter ever, and one of the top three quarters in the past decade.”
The third-quarter figure brought total fundraising by Israel high-tech companies in the first nine months of the year to $2.3 billion, just 1% less than companies raised in all of 2013 and 50% more than the $1.5 billion they attracted in the first nine months of last year, IVC said.
“This increase is mostly explained by an upsurge in the number of large financing rounds above $20 million and the accumulated capital generated by such deals,” Simana explained, noting that some $868 million was raised in deals above $20 million in the first nine months, three times more than a year ago
Among the biggest fundraising of the quarter was Benny Landa’s Landa Digital Printing, which won a $130 million investment from the German specialty chemicals group Altana.
Israeli companies have been riding a boom in startup valuation globally, helped by a flood of money from non-conventional investors and a buoyant market on Wall Street for initial public offerings. Israeli companies have been helped by a series of big, high-profile exits, most notably last year’s acquisition of the navigation app Waze by Google for close to $1 billion.
Israeli venture capital funds, however, remain sidelined by other investors, most notably foreign VCs investing in Israel. In the third quarter, they accounted for just $130 million of all the money invested in Israeli tech companies, down 14% from the second quarter and down 19% from a year ago, said IVC Online, which conducts the survey with KPMG Somekh Chaikin.
IVC Online said the Internet sector accounted for the biggest share of investment, with 40 companies drawing $213 million. Seed companies – the youngest startups – raised $60 million, or 9% of all capital raised and a big increase from the 3%-4% they accounted for in the first half of the year.