What seems to have been a strong start to the year for venture capital investments may turn out to be just a seasonal trend but VC professionals are still expecting the positive 2006 pace of investments to continue this year.
"January is generally a high announcement month because everyone waits till after the December holidays," said Ehud Levy, partner of Vertex Venture Capital. "I think [the concentration of announcements] was a coincidence but the trend of higher rates of investments will definitely continue in 2007."
At least four Israeli start-up companies completed financing rounds in the first two weeks of the year raising some $35 million between them.
The first of these, fabless semiconductor start-up Commex Technologies, raised $8m. in its first financing round co-led by Vertex and Genesis Partners, which will help the Tel Aviv-based company complete the development of its second generation chip and accelerate its sales and R&D activities in Israel and abroad.
Within days, Discretix completed its third round of financing adding $20m. to its pool of funds to further its pursuit of content protection solutions for the mobile content and enterprise market.
In addition to being the largest round for the Israeli-founded company, the funding bore significance in bringing one of the industries most celebrated VC investors to Discretix when Sequoia Capital, which counts tech giants Apple, Cisco, Google, Oracle, Yahoo! and YouTube in its portfolio of investments, participated in the round.
Adding to these, Tel Aviv-based C-nario, which provides systems for digital signage networks and high impact AV applications, closed a $5m. round led by Carmel Ventures and Lucid Information Technologies, a developer of processing solutions for 3D graphics, raised $12m. in equity financing for its series B preferred shares. Intel Capital led the round for Lucid with existing investors Genesis Partners and Giza Venture Capital also providing funds which will be used to complete the company's product development and prepare for its product launch later this year.
Levy noted an increase in investment budgets of larger hi-tech corporations, which justified sustainable revenue models in the Internet and mobile sectors, which he named as his "hot" picks for the year.
"I definitely see a huge number of new entrants in the digital media, Internet and mobile markets with their new technologies, applications and services," he said.
Rather than reading too much into the beginning of year surge in announcements, Yossi Vinitski, managing partner in Challenge Fund, hinted that the VC market seems more intent on riding the wave of exits in 2006 to boost activity this year.
"I don't see that it will double or that there will be a booming trend. Its going keep at the same pace unless something on the downside will happen," Vinitski said. "I think the tremendous year we had in 2006 for mergers and acquisitions will also stimulate the market and give assurance to investors that the VC model is still working."