Israeli VC investments fall 50%

Venture capital firms invested a total of $847 million in Israeli companies from January through September 2009, half of the amount invested during the same period in 2008. 

Third quarter figures also fell 50 percent, year-over-year, according to the IVC Research Centre, an Israel-focused venture capital and private equity research provider. The research group expects the year-over-year rate of decline experienced so far in 2009 to continue in 2010.

“While investments in startups present a gloomy picture, the future is expected to be even worse,” Zeev Holtzman, chairman of IVC and chairman and founder of Israeli firm Giza Venture Capital, said in a statement. He called this period the venture capital industry’s “toughest crisis since 2000″.

The high-tech sector – the growth engine for Israel’s economy – will experience a major setback. Zeev Holtzman

Of the $303 million invested in the third quarter, Israeli venture capital firms invested 29 percent or $89 million, while the rest was invested by foreign venture capital firms and non-venture capital Israeli investors.

Holtzman said there is a scarcity of capital for new investments by Israeli venture capital firms, and as foreign firms fail to find Israeli co-investors, they are likely to further reduce their exposure to Israel.

“The result is that the high-tech sector – the growth engine for Israel’s economy – will experience a major setback from which it will not be able to recover. It is clear that the future for start-ups, VCs and the entire high-tech industry is at risk,” he added.