Israeli VC Fund Raising Dropped 30% in 2012
28 January, 2013
The funds raised only $607 million. "There is a major debate in the industry regarding the optimal fund size with the highest return"
Israeli venture capital funds raised $607 million in 2012, down 30% from the previous year, according to information collected by IVC Research Center and analyzed by IVC in cooperation with KPMG Somekh Chaikin Israel. The leading funds were Sequoia V, Pitango VI and Magma III raised a combined sum of $450 million, approximately 74% of the total raised by all Israeli VCs in 2012. Micro-VC funds continued to attract investments with 6 micro funds raising a total of $83 million, nearly 14% of total capital raised. Four of the 12 VC funds that raised capital during 2012 were new to the local VC management scene. This compares with 8 new players in 2011.
“There is a major debate in the industry regarding the optimal fund size that will result in the highest returns to limited partners,” said Ofer Sela, a partner in KPMG Somekh Chaikin’s Technology group. “We are witnessing VCs reducing the size of their new follow-on funds in an attempt to maximize returns. During the last two years, the number of investment entities making investments in Israel has been on the rise, with most focused on the early stage.”
Between 2003 and 2012, Israel’s venture capital funds attracted $6.77 billion. The capital available for investment by Israeli venture capital funds at the beginning of 2013 was approximately $2.1 billion. Of this amount, only $484 million (23%) is earmarked for first investments with the remainder reserved for follow-on investments. According to IVC projections, Israeli VC funds will raise $600 million in 2013.