Israeli high-tech shows resilience to crisis, yet

21 April, 2016

While experts talk of imminent crisis in the US and China, Israeli high-tech capital raising grew by 8% in Q1/2016, to $1.09 billion

While experts talk of imminent crisis in the US and China, Israeli high-tech capital raising grew by 8% in Q1/2016, to $1.09 billionCapital Raising Q1-2012-Q1-2016

During the first quarter of 2016, 173 Israeli Hi-Tech companies have raised a total of $1.09 billion in private funding rounds, according to IVC Research Center survey . This figure represents a 10% decline compared to $1.20 billion raised by 201 companies in the previous quarter, which was a record breaking quarter. Nevertheless, it represents an 8% increase compared to $1.0 billion raised by 162 companies in the first quarter of 2015.

IVC CEO, Koby Shimna, said that contrary to various predictions recently made about the trends in Israeli high-tech industry, “the results of the first quarter of 2016 indicate stability. The capital volume, the number of quarterly deals, and the mix of deals by size, are very similar to the averages of 2015, which was considered very successful.

“The following quarters will determine if the slowdown trend which began in the United States will take hold in Israel as well, or perhaps the fact that the Israeli market didn’t experience the same peak as Silicon Valley and China in the past years, indicates lower local volatility overall.”

Ofer Sela, Partner in KPMG Somekh Chaikin’s Technology group, believes  the current quarter it of special interest: “There is still much available cash around, ready to be invested, and a significant number of interesting companies that are good candidates for investments. On the other hand, there is fear that the global technology market is about to shrink”.

Capital raised by sector and stage

Software companies raised a total of $392 million in the first quarter of 2016, ranking the sector first with 36% of total capital, a slight increase over the 32% attracted in Q4/2015, and well over the 19% share in Q1/2015. The life science sector placed second with 30%, an increase from 21% of total capital in Q4/2015, and 22% in Q1/2015.

Growth stage deals declined in Q1/2016, reaching 26% of total capital, down from 41% in Q4/2015. At the same time, early stage deal share increased from 20% to 30% with a total of $322 million raised. Initial revenue (mid-stage) deals grew from 32% to 38%, placing first in capital raising, with a total of $411 million raised in Q1/2016.

KPMG’s Ofer Sela explains: “A significant portion of the investments in mature companies is led and driven by private equity funds focusing on growth, and mature entrepreneurs that have made exits back in 2013-2014 and are starting new ventures based on money from investors which deem them trustworthy. It seems that the industry is far from a crisis, although some shrinkage is expected in the near future.”

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