VC investment slides 16% in first quarter

Early-stage financing jumps 15% to six-year high.

By SHARON WROBEL
April 26, 2007 10:11
1 minute read.
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Venture capital investment into Israeli hi-tech companies were down 16 percent in the first quarter from 2006 levels with $392 million raised in 57 financing rounds, although early-stage investment increased by 15% during the same period. "Opening with such strong early-stage deal flow indicates that Israel remains a very viable location for getting entrepreneurial companies off the ground," said Gil Forer, global director of Ernst & Young's Venture Capital Advisory Group. "Investors are also establishing these companies with substantial sums to allow them to compete in a global marketplace." According to the Quarterly Venture Capital Report released by Dow Jones VentureOne and Ernst & Young LLP on Wednesday, seed and first-round deals in the first quarter made up 49% of all completed rounds, compared to just 34% in the same quarter of 2006. "The $124.9m. invested in these seed and first-round deals is the most capital directed to this round class in almost six years," said Forer. A separate report, released earlier this week by the IVC Research Center, found that in the first quarter of 2007, 121 Israeli hi-tech companies raised $406m. from local and foreign venture capital funds and other investors, representing a 13% increase from the $360m. raised by 101 companies in the first quarter of 2006. The difference between the two reports is that the IVC report collects the data of both venture capital raised from capital funds and from other investors, while the Ernst & Young report relates only to capital funds raised. The IVC report also indicated that the first quarter was another successful period for seed companies with 29 early-stage companies attracting $54m., or 13% of the total capital raised. In a sector-by-sector analysis, the Ernst & Young report found that life sciences financings were down, but information technology investments rose 9% from the first quarter of 2007 to $325.5m. while deal flow for IT was relatively steady at 43 deals. Similar to the trend in the US, the information services segment increased significantly with a total of nine deals and $42m, invested in Israel compared with $7m. in the same quarter last year. The median size of deals in Israel held steady at $5m., while in the US median deal size increased to $8m. from $7m. in the first quarter of 2006.

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