Third quarter boost for Israeli companies

The average capital commitment made to Israeli companies in the third quarter 2001 rose by 24 per cent from the previous period, meaning the region enjoyed investment levels similar to 1999.

According to a report from research group VentureOne, the amount invested per round increased from $3m to $5.5m, bringing the quarterly total to $265.9m. The number of transactions remained the same as the second quarter at 42, but the total committed is the highest on record, said the group.

This increase reversed the series of progressively steeper investment declines that began in the fourth quarter 2000, and which ended in a 50 per cent drop between 2001’s first and second quarters, said VentureOne.

Company valuations increased. The average pre-money estimate increased to $11.9m, up from $8.5m for Q2. The report also found the amount of later-stage investments – third round and beyond – rose to 36 per cent, up from 25 per cent for the previous quarter. The largest deal of this nature was secured by Interwise, a Tel Aviv-based developer of electronic learning and collaborative communications software, which raised $34m.

This high investment boosted the Israeli software sector, which had suffered in the second quarter 2001, said VentureOne. In Q3, the market regained its pole position, taking 36 per cent of the overall investments made. Companies operating in the consumer and business services sector also did well. Several ventures completed larger than usual deals and raised a total of $41.8m. The total amount invested in IT companies rose from $172m to $186m, but the amount raised by companies operating in the healthcare sector fell from $28m to $13m.