The amount of money raised by Israeli hi-tech companies slumped to $336 million in the third quarter from $438m. in the same period a year earlier, as the number of companies seeking investment fell to 90 from 113, the IVC Research Center said on Monday.
However, Efrat Zakai, the director of research at IVC, said that capital raising was more stable over a longer time period, and in the first nine months of the year, the amount obtained slipped to $1.07 billion from $1.1b. in the same period of 2004. In addition, Zakai forecast that the figure for 2005 would be $1.4b. compared with $1.47b. last year.
In a recent interview with The Jerusalem Post, Israel Venture Association chairman Yoram Oran said quarterly fluctuations were not important in measuring the long-term investment trend.
"You need to ignore quarterly changes, they are not indicative at all," he said.
He added that VC investments depended as much on the financial needs of the companies as it did on whether or not investors wanted to put money into Israeli technology. He stressed that an important indicator was the amount of seed funding, as this was a guide for future growth.
However, seed funding in third quarter slipped to $34m. from $36m. a year earlier, although it was up from $22m. in the second quarter.
The average company financing round in the third quarter dropped to $3.73m. from $3.87m. as 66 start-ups attracted more than $1m. each, 15 raised $5m.-$10m., four raised $10m.-$20m., and one raised more than $20m.
The amount that Israeli venture capital firms invested fell to $188m. from $194m., although their share of the total amount rose to 56% from an average of 42%. In addition, Israeli VCs invested $20m. in eight foreign companies, down from $23m. a year earlier.
The sector that attracted the most money was communications as 31 companies raised $112m., or 33% of the total. In the same period last year, the sector attracted $121m., or 28%. The next most popular sector was software, with 16 companies raising $55m., while life sciences companies raised $53m. IVC, which carried out the study in cooperation with the IVA, said the survey was based on reports from 92 venture investors of which 57 are Israeli management companies.