Israeli VC investment down a third

Venture capital investment in Israel has fallen by a third, highlighting the difficulties of attracting investment to the troubled region.

Venture capital investment in Israel in Q2 of 2002 has fallen by over one third to $217m, with most of this total going to only three companies.

The figures, published by PricewaterhouseCoopers, represents a fall of 37 per cent compared to the $344m invested in quarter one, which in turn was a drop of 25 per cent against the Q4 2001 figure.

There had been hopes for a rise in Israeli venture capital investment at the end of 2001, despite a 63 per cent year on year drop last year to $1.4bn. But the latest figures represent the lowest amount of investment since the second quarter of 1999, when VC investment totaled $228m.

Part of the problem for Israeli firms is the ongoing Israeli-Palestinian conflict. In April, Japan’s Nomura Holdings refused to meet a $3m commitment to Israeli fund Delta Ventures, citing political problems in the region.

The survey found that 70 high-tech companies raised venture capital financing in the second quarter, compared with 76 in the first quarter. The average investment in the second quarter was $3.1m compared with $4.5m in earlier period. More than one-quarter of the 70 venture capital funds surveyed made no investments in the second quarter.