Venture capital investments in Israeli companies declined 17 percent to $251.8 million in contrast to a 5% rise in the US, Ernst & Young and Dow Jones VentureOne said Monday in their joint quarterly venture capital report.
The survey showed that the VC community invested $6.73 billion in 619 deals in the US, making it the strongest quarter for investments since the fourth quarter of 2001.
While the US market focused on healthcare and information technology, the software, information services and biopharmaceutical sectors were the strongest performers in Israel, where VCs focused more on early stage investing.
"In Israel, investors have not focused as heavily on health care as in the US," the research noted, adding that local biopharmaceutical investment increased 43% in the quarter to $19.5m. in 10 deals. However, overall health care investing in Israel slid from the same quarter last year, with three fewer deals and 35% less capital, it said. In the US, capital investments in healthcare grew 25% to $2.24b. in 160 rounds, also boosted by biopharmaceuticals, which raised $1.45b.
The report explained that Israel's investment stronghold remains in information technology, which saw $161.4m. invested in 33 deals in the second quarter, but added that although deal flow was steady compared to the parallel quarter last year, capital investments was down 25%. The average size of Israeli IT investments was $6m. for the quarter, up from $5m.
While the US IT market also saw significant growth, the report singled out the energy sector where "growing interest in renewable sources of energy fueled increases in the alternative energy segment." Investments in alternative energy companies grew 290% to $239.1m. from 15 deals, triple the number in the second quarter last year.
New areas of growth in Israel included advanced materials and chemicals in which $18.7m. was invested.
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