The Money Tree of the accounting firm Kesselman and Kesselman PwC, relating to the second quarter of 2005, states that the level of investments in high-tech companies in Israel, backed by venture capital funds (one of the investors in the investment round is an Israeli venture capital fund), was the same to the one registered in the last two quarters and is about 12% lower than the corresponding quarter last year.
The survey data shows that in the current quarter, approximately 286 million dollars were raised compared to 292 million dollars in each of the last two quarters and 326 million dollars in the corresponding quarter last year. Also, a 10% decrease was observed in the number of companies that raised capital compared to the previous quarter: 78 hi-tech companies operating in Israel in the current quarter, compared to 87 in the previous quarter. The average investment in the company in the current quarter was at the level of 3.7 million dollars, compared to 3.3 million dollars in the previous quarter and 4.7 million dollars in the corresponding quarter last year.
The analysis of the survey findings further shows that the total investments in the first half of 2005 amounted to 578 million dollars (1.15 billion dollars in annual terms), similar to the first half of 2004 which amounted to 580 million dollars.
From the analysis of the companies in the first stages (Seed Stage), which raised capital in the first half of 2005, compared to the corresponding half last year, it appears that there was a 50% increase in the number of companies raising - 30 companies in 33 transactions compared to 20 companies in 24 transactions respectively, and an increase of 81% of the total investment in monetary terms - 78 million dollars compared to 43 million dollars respectively. In addition, investments in companies at the seed stage in the first half of 2005 exceeded the investments in these companies in each of the years 2002 and 2003. Yossi Filos, senior partner and director of the high-tech sector at Casselman and Casselman PwC, noted that from a comparative analysis against fundraising rounds in the US, it appears that the share of seed investments in Israel is growing at higher rates than in the US. This phenomenon partially explains the growing presence of American venture capital investors in Israel.
54% of the fundraising - by local venture capital funds
The share of the local venture capital funds maintained its high level in the second quarter of 2005 and stood at 153 million dollars, which is about 54% of the total investments for the quarter in monetary terms, similar to the previous quarter in which the local funds invested 159 million dollars, which was 54% of the total investments for that quarter. The findings of the survey show that 38 companies, which constitute 49% of all companies that raised capital this quarter, benefit from the assistance of the chief scientist, of which 30 are listed as Israeli. 192 million dollars of the total funding went to companies supported by the chief scientist, compared to 109 million dollars in the previous quarter.
The biotechnology sector has weakened
The communications and networks sector, which continues to establish its status as the leading sector in Israeli hi-tech, raised approximately 108 million dollars that flowed to 21 companies, compared to 95 million dollars that flowed to 28 companies in the previous quarter. The life sciences sector collected about 70 million dollars in the current quarter compared to 46 million dollars in the previous quarter and 44 million dollars in the corresponding quarter last year. The field of biotechnology, which in the previous quarter gathered only about 2 million dollars raised by 3 companies, continues to show weak performance in the current quarter when 5 companies gathered only 10 million dollars. The results of the survey in the first half of 2005 indicate that the biotechnology companies are unable to raise significant amounts and the volume of transactions is much lower than their past performance. The 12 million dollars raised in 8 deals (by 7 companies) in this sector during the first quarter indicates a decrease (in money terms) of 70% compared to the corresponding quarter last year, in which 14 companies raised 41 million dollars in 15 deals.
The software sector has returned to its normal level
The field of medical devices registered an increase of 35% in the current quarter, when 15 companies raised approximately 60 million dollars compared to 44 million dollars that flowed to 13 companies in the previous quarter and 20 million dollars that flowed to 8 companies in the corresponding quarter last year.
After in the previous quarter the software sector recorded an increase with the raising of 86 million dollars, this sector returned to its level in recent years and collected 55 million dollars in the current quarter. The average investment in the company was 3 million dollars compared to 3.9 million dollars in the previous quarter. The first half of 2005 was characterized by the growth of start-up companies in this sector that raised capital: 9 software companies managed to raise about 27 million dollars compared to 4 companies that raised only 3.8 million dollars in the corresponding half last year.
The semiconductor sector continues to maintain stability in the scope of investments in financial terms, when 5 companies raised 24 million dollars compared to 4 companies that raised 20 million dollars in the previous quarter.
