13 Israeli venture capital funds raised $526 million in 2013
• Vintage and Aleph topped $100m each
• Micro-VC funds accounted for 24% of capital raised, their largest share in three years
• Average fund size off 53% from 10-year $76 million average
TEL AVIV, January 14, 2014-- The year 2013 was less successful than the past two years in terms of Israeli venture capital fund raising, with 13 funds raising $526 million, almost 28 percent below the $725 million raised by 14 Israeli VC funds in 2012 and 28 percent under the 10-year average of $732 million.
The average fund size in 2013 fell to $41 million, well below the $76 million 10-year average. The decrease mostly reflected the formation of a large number of new micro-VC funds.
Only two funds managed to raise more than $100 million each, in 2013: Vintage’s sixth fund attracted $161 million, and Aleph – a new fund raised by veteran venture capital investors Michael Eisenberg and Eden Shochat – raised $151 million. The two funds accounted for 59 percent of total capital raised in 2013. In 2012, Pitango, Sequoia and Magma each raised over $100 million and accounted for 84 percent of total capital raised.
In 2013, micro-VC funds accounted for almost $124 million or 24 percent of total capital, the largest share in three last years, while the number of micro-VCs decreased to eight, compared to nine and 11 in 2012 and 2011, respectively.
Micro VCs became a more prevalent phenomenon, especially in the past three years, as 58 percent of capital raised by micro-VCs in the past decade was raised since 2011.
Koby Simana, IVC CEO, said, "It seems that fund raising has slowed since 2011, with less capital being raised by fewer funds. Noteworthy too, is that the majority of first-time funds in 2013 were micro-VC funds, specializing in early stage startup investment. However, we believe this is not a new strategy for VC funds, but rather a reflection of the difficulties of fund raising by both first time funds and established funds.”
Five of 13 VC funds that raised capital in 2013, were raised by new players – management companies just entering the local scene – and accounted for 42 percent of the total raised. This compares to seven funds that joined the VC industry in 2012 and captured some 10 percent of total capital raised that year.
Ofer Sela, partner in KPMG Somekh Chaikin’s Technology group, explains that "In the late '90s and the ensuing decade foreign investors invested in Israel mainly through venture capital funds that were managed locally. The tremendous success of the Israeli technology market, together with the experience and confidence gained by some investors led to a change, and now a substantial number of foreign investors are investing directly in Israel's technology market through foreign VCs, corporate VCs or as individuals. A significant number of foreign VCs operating from the US, Europe or the Far East allocates substantial capital from the overall managed capital to investments in Israel.
Except for a handful of institutional investors, the local capital market is not taking part in the success of Israel's venture capital industry. Substantially all of the gains of Israeli VC funds is being enjoyed by foreign investors, and the Israeli economy is not reaping its benefits as an investor. These factors result in insignificant capital being raised by the local VC funds, especially relative to total investments in Israeli portfolio companies.
We hope that the regulatory barriers will be removed, and the Israeli capital market will take part in local VC funds in a way that will contribute to the overall Israeli economy from the standpoint of appreciation of capital and also from increased tax collections."
Capital available for investment by Israeli venture capital funds at the beginning of 2014 was approximately $1.6 billion. Of this amount, only $359 million (22 percent) is earmarked for first investments. The remainder is reserved for follow-on investments. According to IVC, 30 Israeli VC funds are currently in the process of raising capital, with a targeted total of over $2 billion. However, only half are expected to raise capital in 2014, not more than $1.0 billion.
The above data are based on information collected by IVC Research Center and analyzed by IVC in cooperation with KPMG Somekh Chaikin Israel. The data includes information on capital raised by Israeli venture capital funds, venture lending funds, secondary funds and fund of funds. Calculations are based on vintage year determined by the earliest: first capital call or first investment by the fund. Detailed statistical information on Israel’s venture capital industry will be reported in the IVC High-Tech Yearbook 2014 to be published in April 2014. The Israeli Funds Raising Scorecard, regularly updated, is available at IVC-Online.com.
For additional information:
Marianna Shapira, Research Manager, IVC +972-73-212-2339 email@example.com
Or visit: www.ivc-online.com
About the authors of this survey:
IVC Research Center is the leading online provider of data and analysis on Israel’s high-tech, venture capital and private equity industries. Its information is used by all key decision makers, strategic and financial investors, government agencies, academic and research institutions in Israel.
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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.
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