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.
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.