Deloitte: Facebook IPO could help local start-ups

Facebook’s much-anticipated initial public offering will likely provide an unintended boost for Israeli Internet start-ups, according to accountancy firm Deloitte Brightman Almagor Zohar.

The excitement surrounding the expected sale of the social network and publication of its vital statistics should trigger fresh global interest in venture-capital investment in Internet and new-media start-ups, the firm said in its quarterly VC Indicator Survey, which it published Sunday. It said the impact would naturally be felt by Israeli start-ups.

Facebook filed for its IPO last Wednesday, which is expected to value the company at somewhere between $75 billion to $100b. The application revealed that the company generated a $1b. profit last year from $3.71b. in revenues, most of which were made from advertising.

The rest of the VC Indicator Survey was not quite as positive. Based on a poll of venture capitalists taken in the last quarter of 2011, it predicted that the growing economic crisis in Europe would hurt the Israeli hi-tech industry.

Eight-seven percent of senior Israeli venture capitalists polled for the survey foresaw decreased activity this year.

There has been a decline in the number of traditional venture-capital funds, said the report’s author, Tal Chen. But other support bodies are emerging, he said, such as venture-capital microfunds that support start-ups in the early stages, accelerators that accompany them in developing their project and groups of private investors.

Thirty-nine percent of respondents said they would invest less in start-ups in the next six months, while only 10% said they would increase investments in that period; 69% predicted it would be harder for start-ups to raise capital in the first half of 2012 than it was in 2011, while just 6% believe it will be easier; 22% said they would target investments in late-stage companies in 2012, compared with fewer than 6% last year.

Just over half the venture capitalists said the current economic crisis would have a similar effect on hi-tech companies as the 2008-09 global crisis. Exactly one-quarter believed the current crisis would have a smaller impact than the previous crisis, while 22% said it would have a greater effect. The Internet was the most attractive industry for venture-capital investment and mergers and acquisitions this year, while cleantech was the least attractive, the survey said