Although more high-tech companies raised capital in 2012 than in 2011, the total amount of funding fell. At the same time, investment in seed-stage companies hit a five-year high, the IVC Research Center and KPMG Somekh Chaikin report today..
575 high-tech companies raised $1.92 billion in 2012, 10 percent less than the $2.14 billion raised by 545 companies in 2011. Venture capital backed deals fell 22 percent from $1.76 billion in 2011 to $1.37 billion in 2012, and investments by Israeli venture capital funds fell 19 percent from $638 million to $516 million.
163 Israeli high-tech companies raised $494 million in the fourth quarter of 2012, 14 percent less than the $571 million raised by 124 companies in the corresponding quarter of 2011, but 5 percent more than the $468 million raised in the preceding quarter.
First investments by Israeli venture capital funds rose 8 percent to $195 million in 2012 from $181 million in 2011. The remaining 62 percent of investment -- $321 million -- was in follow-on investments.
IVC says, "The Internet sector proved, by far, to be the most attractive sector as more than twice as many early-stage Internet companies were funded in 2012 than in 2011. Technology developments in recent years in both cloud-based infrastructure and content delivery platforms have enabled Internet companies to mature and develop their intended technology with greater capital efficiency than any other sector."
The life sciences sector raised 28 percent more capital in 2012 than in 2011, with 134 companies raising $497 million during the year.
KPMG Somekh Chaikin technology group partner Ofer Sela said, "2012 was a record one in terms of the number of companies raising capital over the past decade. In early stage investments, micro-VCs and angel investors succeeded in filling the void left by Israeli VCs".
IVC CEO Koby Simana said, "Despite a decrease in capital raising, the figures in fact demonstrate the strength of Israel's high-tech industry. In 2012, we saw investors shifting back into early stage and seed investments with a five-year record $146 million raised by 157 seed companies. While investment by Israeli VC funds is shrinking, foreign VCs as well as corporate and private investors are gradually increasing their activity. As a result, I'm optimistic about the high-tech industry's chances of maintaining the current level of capital raising in the coming year."
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