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Venture capital raised by Israeli hi-tech companies was down 40 percent in the second quarter, compared with 2008 levels, the Israel Venture Center Research Center reported in its quarterly survey Wednesday. Out of the $279 million total, 40% was raised by early-stage research and development companies, it said.
"We are not surprised by these numbers," Koby Simana, the center's CEO, said Wednesday. "The amount and rate of capital raised are in line with our earlier forecast of $1 billion for the full year."
"The sharp fall in investment activity will undoubtedly have an impact on the number of start-ups that will be able to operate in Israel in the future," the center warned in its report.
The second quarter of 2009, saw 122 Israeli hi-tech companies raise $279m. from local and foreign VC investors, down 40% from the $465m. raised by 115 companies during the same quarter last year. However, funds raised last quarter were 5% more than the amount raised in the first quarter of this year.
Israeli venture-capital funds invested $113m. in Israeli companies in the second quarter, 30% less than the $161m. invested in the same quarter last year. Funds invested last quarter were 7% higher than the first quarter's $106m.
In the first six months of this year, capital raised by Israeli hi-tech companies dropped 50% to $544m., down from $1.1b. in the first half of 2008, which was the highest since 2001. The volume of investment by Israeli VCs into Israeli companies plunged 48% in the first half of the year, to $219m., down from $423m. invested by Israeli VCs during the same period last year.
The life-sciences sector took the lead in attracting money in the second quarter, raising $76m., or 27%, of the total capital. It was followed by the software sector, which attracted $64m., or 23%, of the total.
In the first half of the year, the communications and the life-sciences sectors led capital raising with $126m, or 23%, of total capital raised, followed by the software sector, with $120m., or 22%.
Early-stage R&D companies dominated fund-raising in the second quarter, attracting 40% of the total. Seed companies captured 9%, compared with 5% raised both in the previous quarter and in the second quarter of 2008.
The average company financing round dropped to $2.29m. in the second quarter, down from $4.04m. the same quarter last year.
Seventy-four companies attracted more than $1m. each, with 13 companies raising between $5m. to $10m. each and four companies raising between $10m. to $20m. each.
The center's survey is based on reviews of 80 VC investors, including 46 Israeli management companies and 34 mostly foreign investment entities.