Israeli VCs increase new investment

An increase in first round investments made in Israel last year looks set to continue into 2004, despite a slight downturn in the overall number of deals completed in 2003.

Israel’s venture capital sector looks set for a more positive 2004, with a new report suggesting that firms are increasing the number of investments they make in new companies.

The IVC Research Centre, based in Tel Aviv, found the total number of deals entered into by the top ten Israeli venture capital funds stood at 135 last year, only slightly below the 138 deals completed in 2002. Significantly last year, first or new portfolio investments accounted for 47 percent of the total amount invested by Israeli venture capital funds, a 10 percent increase on 2002.

 

The shift towards new investments is good news for Israel’s venture capital sector, following a lengthy period during which firms made only follow-on investments to portfolio companies. “Israeli VC funds focused on supporting their portfolio companies over the last two years,” said Guy Holtzman, IVC General Manager. “Only recently have we seen a rise in [new] investments. This trend is likely to continue in 2004.”

 

The IVC survey, which looks at the number of new investments made by VC firms as well as the total number of investments including follow-on investments, found that Pitango Venture Capital, the technology investor based in Herzliya, which made eight new portfolio investments in 2003, double the level of 2002. Pitango also made ten follow-on investments during the year. Giza, Genesis and Vertex were the second biggest investors last year, with each making six new investments.

 

IVC estimates that Israeli high-tech companies raised $1 billion in 2003 from Israeli VCs and other investors. Capital raising for 2004 is projected by IVC to again approximate the $1 billion level. In 2001, Israeli start-ups secured investments totaling $1.4 billion.