Israel has been ranked among the four most preferred global target markets for US venture capital funds and earmarked for high-quality deal flow, according to a global survey by accounting and consultancy firm Deloitte Brightman Almagor and the Israel Venture Association.
"It is clear that the interest US venture funds are showing in Israel will continue and even intensify further in the future," said Igal Brightman, Global Managing Partner of Deloitee's Technology, Media & Telecommunications Industry Group. "It is worth noting that European funds still do not consider Israel an attractive investment location, even though Israel is close to Europe, and is suited to European funds' policy of investing in neighboring countries."
"Israel, India, China and Canada were by far the most 'seductive' target markets for investment by US firms," stated the 2007 Global Venture Capital survey conducted among 500 venture capitalists world wide.
Furthermore the survey revealed that 70 percent of the venture capitalists questioned rated Israel as the top for high-quality deal flow compared with 21% who chose Canada, 18% for China, 17% for the UK and Ireland and 10% for India.
In the category of top-rate entrepreneurs, Israel came in second in the ranking as 20% of venture capital managers said the country was a prime source of high quality entrepreneurs, against 21% who named Canada. In the list of preferred locations for offshore R&D activity, VC managers rated Israel in third place as 7% named Israel as their preferred location, against 29% who named India and 8% who named China.
About 6% of US venture capital managers considered Israel as their primary location for expanding their investments overseas, compared with 2% who chose Europe and less than 1% who chose the Asia-Pacific region.
However, among the challenges Israel faces in attracting US investing was the perceived lack of talented portfolio management teams in addition to the difficulties in achieving successful exits, personal safety and security concerns, and an unstable political environment. At the same time, VCs were focusing on their local entrepreneurs, and as a result foreign investors had fewer opportunities to invest.
Overall, the survey showed that VC investment was increasing but growth was slow and cautious. US venture capital funds, it found, were not flocking broadly to global investment opportunities but instead were investing cautiously in countries such as China, India, Israel and Canada. The VCs said they preferred to play globally by investing in domestic companies with significant operations offshore versus directly investing in foreign entities.