Venture capital raised by Israeli start-ups and technology companies dropped 22 percent in the fourth quarter, compared with the same quarter in 2007, as the global financial crisis is starting to dry out investments, the Israel Venture Capital Research Center said Monday. "While 2008 was an exceptional year for capital raising, the global recession cannot be ignored," said Ze'ev Holtzman, chairman of the research center and Giza Venture Capital. "In the upcoming year, investments in Israeli hi-tech companies will undoubtedly be lower." If the year had finished in the third quarter, 2008 would have been a record year in capital raisings by Israeli hi-tech companies. Local hi-tech companies raised $600 million in the third quarter of 2008 from venture investors, both local and foreign. The quarterly amount was the highest reported in the last eight years. The figures for the fourth quarter reflect the impact the global financial crisis and the credit crunch is having on capital raisings. In the fourth quarter, 109 Israeli hi-tech companies raised $394m., 34% below the $600m. raised in the previous quarter and 22% below the $503m. raised in the fourth quarter of 2007. For the entire year, 483 Israeli hi-tech companies raised $2.08 billion from local and foreign venture investors, 18% above the $1.76b. raised in 2007 and 28% above 2006 levels. Holtzman said he was optimistic about Israeli hi-tech. "2009 will be a tough year for all companies, yet the Israeli hi-tech industry will continue to be a highly abundant source of technology innovation," he said. The survey is based on reports from 82 venture investors: 48 Israeli management companies and 34, mostly foreign, investment entities. It showed that first investments made by Israeli VCs in 2008 declined to 31% of the total amount invested by Israeli VCs, compared to 43% in 2007. "In 2008, numerous companies sought sufficient funding to sustain themselves in the approaching recession," said Efrat Zakai, director of research at the research center. "Israeli VC funds, working to support their portfolio companies, focused on follow-on rounds, with less capital directed to first-time investments." Sector-by-sector analysis showed that in 2008, the communications sector led capital raising with $516m., or 25% of total capital raised, followed by software with $407m., or 20%, and the semiconductors sector with $323m., or 16%. Internet firms continued to attract investor attention with 14% of capital raised in 2008 and 15% in 2007. In 2008, 70 seed companies attracted $104m., or 5% of capital raised, below the 8% average of the previous four years.