Israeli VC fund first investments up 55% from the previous quarter
Internet attracted $343 million – highest ever quarterly amount for the sector
Initial revenue stage led all investments for the first time since 2013
In the first quarter of 2015, 166 Israeli high-tech companies raised
$994 million – the second highest quarterly amount in the last decade and just 10 percent below the record high $1.1 billion invested in 184 companies in the previous quarter, according to the IVC-KPMG Israeli High-Tech Company Capital Raising report for the first quarter of 2015. The Q1/2015 amount was 48 percent above the $673 million attracted by 160 companies in the first quarter of 2014.
The average company financing round reached $6 million, equal to the previous quarter’s average, and well above $4.2 million of Q1/2014.
In Q1/2015, 91 VC-backed deals accounted for $832 million – 84 percent of total capital invested.
The average VC-backed deal peaked at $9.1 million, compared to $7.7 million and $6.1 million in Q4/2014 and Q1/2014, respectively.
Ofer Sela, partner at KPMG Somekh Chaikin’s Technology group commented, “As can be seen from Q1 2015 results, the level of investment activity in Israeli companies is on the rise. This trend
is being fueled by higher revenues, improved business results and other key performance indicators. However, the returns from the appreciation in value of VC-backed Israeli companies are
mostly enjoyed by foreign investors. The majority of Israeli institutional investors, and through them the Israeli general public, is not participating in venture capital investments. ”
Sela believes that “The Israeli government should consider actions that encourage and facilitate Israeli institutional investment at a much higher level than currently. By doing so, global and local
momentum could enable Israel’s technology industry to expand and become a global technology superpower in absolute numbers, not just relative to its size.”
Israeli VC Fund Investment Activity
Israeli venture capital funds invested $180 million in Israeli high-tech companies or 18 percent of all investments in Q1/2015. The amount was down 6 percent from $192 million (17 percent of total) invested in Q4/2014, but 80 percent higher than the $100 million (15 percent of total) invested in Q1/2014.
First investments by Israeli VC funds accounted for 31 percent in Q1/2015, a marked improvement, 55 percent above the 20 percent of the previous quarter although still below the 43 percent of Q1/2014.
Capital Raised by Sector, Stage and Deal Size
The Internet sector experienced its best quarter ever with $343 million (35 percent) raised by 44 companies, and the sector continued to lead capital raising as in the two previous quarters. The life sciences and software followed, accounting for 22 percent and 19 percent of total capital raised, respectively.
“The increase in high-tech capital raising is not coincidental, but directly reflects the trend toward growth company investments and higher valuations of mid and late stage companies,” noted Koby
Simana, CEO of IVC Research Center.
“Up to a year ago we were accustomed to seeing average financing rounds of $3 million to $4 million, in the Internet sector. In recent quarters though, we’ve been observing a distinct rise in the average Internet financing round. This trend is even more evident among growth stage Internet companies for which the average deal jumped from $6 million about a year ago to $16.3 million in the first quarter of 2015. Even though exceptionally large financing rounds of Taboola and Quixey (led by Alibaba) were responsible for the jump in Q1, our analysis shows that these were not special or unique events. They fit in well with the activity surrounding the Internet sector and the rise in the number of early stage investments. These parallel trends mostly feed each other as the increase in growth stage Internet companies attracts more entrepreneurs and investors into the sector. We believe that Internet success stories will drive the volume of growth deals as well as contribute to increase seed stage investments, which up until last quarter, were on the decline,” concluded Simana.
Another emerging trend is the increase in growth stage deals, which was accelerated in Q1/2015, when initial revenue companies led all investments for the first time since 2013 with 47 firms raising $319 million (32 percent). Early stage companies attracted $315 million (32 percent), a decrease of 14 percent from the especially strong previous quarter, when early stage firms led capital raising. Late stage companies followed closely with a 31 percent share of total investments.
Additionally, Q1/2015 demonstrated escalation in deals above $20 million, a trend pointed out in the previous quarter’s IVC-KPMG Survey. In Q1/2015, deals above $20 million reached record
levels, with 16 deals that accounted for 55 percent of total investments. In comparison, there were 13 deals (42 percent) and six deals (27 percent) in Q4/2014 and Q1/2014, respectively.
IVC Research Center
is the leading online provider of data and analyses on Israel’s high-tech, venture capital and private equity industries. Its information is used by key decision-makers, strategic and financial investors, government agencies and academic and research institutions in Israel.
KPMG Somekh Chaikin
’s technology professionals offer insights and experience accumulated from a long history of work with technology and life science companies. Through a global network of highly qualified professionals in Israel, the Americas, Europe, the Middle East, Africa and Asia-Pacific, KPMG helps clients address the opportunities and challenges driven by new business models such as cloud computing, mobile services and others. KPMG is a global
network of professional firms providing Audit, Tax and Advisory services. KPMG operates in 146 countries and has 140,000 people working in member firms throughout the world.]]>