Life sciences companies attracted a record of $115 million, or 30 percent of the total capital raised by Israeli hi-tech companies in the third quarter of 2006, according to the Israel Venture Capital Research Center, which said it expects Israeli companies to raise a total of $1.5 billion this year.
"The first nine months of 2006 showed a 7% increase in capital raising to $1.145b., compared to $1.073b. in the corresponding period in 2005," said Efrat Zakai, director of research at IVC. "We expect a stable annual investment level in 2006 - for the third straight year - with approximately $1.5b. in capital flow."
Amid hostilities in the North, 87 Israeli hi-tech companies raised $381m. from local and foreign venture investors in the third quarter, representing a 13% increase year-on-year. In comparison to the previous quarter though, venture capital raised was down 6%.
"The small decrease in investment in Q3 indicated that the war, which took place during the third quarter, had only a very minor impact on venture capital investments," said Zeev Holtzman, Chairman of IVC Research Center and Giza Venture Capital. "It signifies that investors continue to see stability and credibility in Israeli hi-tech, a fact which is also reflected in the slight increase in the share of foreign investment during the Q3 period."
In the first nine months of 2006, the share of foreign investors as well as non-VC Israeli investors increased to 59% from 51% during the same period last year. Investment of Israeli VCs in Israeli companies in the third quarter of this year, however, fell to $142m. from the $154m. invested in the previous quarter and the $188m. invested in the same quarter of 2005. The Israeli VC share of the total amount invested in Israeli hi-tech was 38%, with the remainder of capital coming from foreign investors as well as non-VC Israeli investors, the report said.
Israeli VCs invested $12m. in six foreign companies during the third quarter of 2006, compared to $8m. invested in the previous quarter and $30m. invested in the third quarter of 2005. One of the six investments, for $5m., was a first investment, while the remainder constituted follow-on investments.
On a sector by sector comparison, the life sciences sector led VC financing as funds raised more than doubled in the third quarter of 2006 from $53m. the same time last year and $68m. in the previous quarter.