Foreign VCs surpass Israeli funds in first investment deals, reports new data

According to data released by the IVC Research Center, which analyzes Israel’s private equity and venture capital industries, the number of local VC funds making their first investment in Israel in 2013 were greatly outnumbered by foreign VC firms doing the same. The IVC reports that 84 foreign VC funds made at least one first investment in Israel in 2013, an 11 percent increase from 2012.. However, only 38 Israeli VC funds made at least one local first investment in 2013. Further, the IVC says that of the “255 first investment deals made in 2013, only 111, or 44 percent, were made by Israeli VC funds.”

PRESS RELEASE

Tel Aviv, Israel, March 12, 2014. IVC Research Center released today a report analyzing first investments in Israel by venture capital funds in the five years through 2013, and ranking the most active venture capital funds that invested in Israel in 2013. Based on the IVC Industry Analytics business intelligence product, the report reveals trends in venture capital fund first investments in Israel. While 2013 first investments showed little change in both the number of VCs and number of first investments compared to the previous two years, interesting changes have taken place in the dynamics and mix of those initiating first investments.

The five-year average for VC first investments at 208 deals and 103 investors is skewed downward by a relatively low number of first investments in 2009 and 2010. In the three years through 2013, first investments leveled, on average, at around 255 deals, by 121 investors. 2013 showed marginal decrease from 2012 figures, with 255 deals and 122 investors making first investments, compared to 260 deals and 122 players in 2012, reflecting a two percent decrease in the number of deals, but keeping it at par with the three-year average.
Marianna Shapira, Research Manager at IVC, explains that the data for 2013 – showing little change from the previous two years – do not present the full picture. “Our surveys and research pointed to changes in several trends,” says Shapira. “So, the first thing we did was look at the ratio of foreign to Israeli VC funds in making first investments.”

“The market in Israel was accustomed to foreign investors being ‘gap fillers’ or ‘tag along’ investors, but we can see a dramatic increase in the number of foreign venture capital funds initiating first investments over the past five years,” says Shapira. Eighty-four foreign VC funds made at least one first investment in Israel in 2013, an 11 percent increase compared to 2012’s 76, and a substantial 223 percent increase from 2009 levels. And while foreign investors increased their activity in Israel, Israeli VC fund first investments dropped to near 2009’s level, with only 38 Israeli VC funds making at least one first investment. Of 255 first investment deals made in 2013 only 111, or 44 percent, were made by Israeli VC funds.

“This is the first time Israeli VC first investments dropped below 50 percent of the total,” says Shapira. “They accounted for 52 percent in 2012 and 72 percent in 2009. Even in 2010, when the number of active Israeli funds fell to 29, they still managed to hold 51 percent of first investments. We’ve observed the influx of foreign capital to high-tech financing in our recently published 2013 high-tech capital raising survey, and this analysis confirms that foreign VC funds are indeed taking the lead in new high-tech investments in Israel.”

The number of VC investors in the five top ranked positions increased in 2013 as did their number of first investments. Seventeen funds, making from five to 11 first investments in 2013, placed in the top five rankings with a total of 106 first investments. While the number of VCs in the top five rankings was only the second largest in five years, the total number of deals reached record levels – 89 percent above 2012 figures and 31 percent above the five-year average.

The shift in trend, explains IVC, is a result of the increase in the both the number of foreign VC funds and the number of micro VC funds making multiple first investments. While there is an increase in the number of investors making only a single first investment – 79 in 2013, compared to 67 in 2012 and a five-year average of 62 – half of the micro VC funds made more than one first investment, compared to only 32 percent of other funds.

Koby Simana, CEO of IVC Research Center explains: “We are seeing a mix of trends in 2013, but everything points in the same direction: Israeli VC funds are running out of capital for first investments. The top ranked list includes mostly VC funds that succeeded in raising capital in the past three years, such as Pitango, Magma and Sequoia Israel, as well as micro-VCs Wadi and lool.”

The micro-VC investment model allows for more investments, adds Simana. “The increase in micro-VC activity is both a function of their relative success in raising capital and the fact that their average investments are far smaller than those made by larger funds. This explains why we see more of them making multiple investments. As the trend continues, we expect to find additional micro funds joining the top ranks in 2014.”

The most active micro venture capital fund in 2013 was SG, a US fund managing $25 million in capital, with 11 first investments in total. Ranking second was Wadi Ventures, a local micro-VC fund raised in 2012, with eight first investments in 2013. Among other funds, the top ranked fund was Pontifax, with eight investments made by an $88 million fund raised in 2011. Ranking second with seven first investments are two funds: Pitango’s sixth fund ($270 million), and Magma’s third funds ($110 million), both raised in 2012.

This press release contains analyses based on the IVC Most Active Investors Dashboard, an IVC Industry Analytics business intelligence product, containing detailed information on active VC and other investors via an interactive, user-friendly interface. The Dashboard is available online to IVC Industry Analytics subscribers and presents a wealth of continually updated investor data, which can be filtered according to year, type of investor, type of investment and more.
Further information on Most Active Venture Capital Funds in 2013 will be published in IVC High-Tech Yearbook 2014 in April 2014.

Methodology:
The IVC Research Center ranked Israeli and foreign venture capital funds according to the number of first investments made in Israeli high-tech companies in 2013, excluding incubated companies, foreign companies or non-technology companies. The data are based on information received directly from the VC funds and from the IVC-Online Database (www.ivc-online.com). Rankings reflect the number of deals only, not capital invested and are divided into two tables, according to managed capital: VC funds with $50 million or more under management and micro-VC funds.
Most Active Venture Capital Funds in Israel – 2013
Ranked by Number of First Investments

Rank VC Fund Capital Managed ($m) Total First Investments Company Portfolio Name
1 Pontifax1 206 8 TheraCoat, OCON, V-Wave, HeadSense, BioCep, Bioblast, Eloxx, Metabomed
2 Pitango 1610 7 Keepy, JethroData, Taboola, SalesPredict, Ubimo, Revizer, Carambola
3 Vintage2 696 6 Innovid, Superfish, SundaySky, Wilocity, Outbrain, TabTale
Magma 300 6 AppWiz, WireX, CloudEndure, Foresight Info, Inplerus, Adience
Battery3 N/R 6 Elastifile, SiSense, Scodix, Cyvera, Stratoscale, PrimaryData
Horizons3,4 N/R 6 Nipendo, Kaiima, Meteo-Logic, MeMed, Aniways, Crosswise
Lightspeed3 N/R 6 Scodix, Personetics, Insightera, Bluevine, PrimaryData, Elastifile
Marker3 N/R 6 Interlude, iDoMoo, MobileSpaces, Eyeview, OverWolf, Panoramic Power
4 Sequoia Israel5 800 5 Pyramid Analytics, Seculert, Forter, Moovit, EndoSpan
OrbiMed Israel1,5 222 5 Medigus6, BioLineRx6, InspireMD6, Treato, Redhill6
Genesis Angels3 N/R 5 Infinity AR6, Beyond Verbal, StoreDot, Sirin, Stox
Kreos3, 7 N/R 5 GetTaxi, MultiPhy, Pontis, QualiSystems, RealMatch
Notes:
• Ranking includes Israeli and foreign VC funds that manage $50 million and over in capital
• Amount of capital managed by foreign VC funds is not relevant (N/R) for this ranking

1. Life sciences specialized fund
2. VC / Secondary fund
3. A foreign VC fund with an allocation to Israel
4. Controlled by Li Ka Shing (Hong Kong)
5. Israel-dedicated fund of a foreign fund
6. Public company
7. Venture lending fund
Most Active Micro-Venture Capital Funds in Israel – 2013
Ranked by Number of First Investments

Rank VC Fund Capital Managed ($m) Total First Investments Company Portfolio Name
1 SG VC1 N/R 11 Fireblade, Mallpad, Zao, Interlude, DudaMobile, Keywee, Tipalti, SalesPredict, Loop Commerce, Pluralis, Commerce Sciences
2 Wadi 3 8 Bablic, Clctin, Folloyu, Meetey, PicBadges, SeatID, Talking Layers, WinkApp
3 lool 30 6 MyPermissions, Tomodo, Easy Social Shop, MediSafe, Kidoz, Doobe
Innodo 5 6 Biocatch, Scoreoid, Screemo, Spetz, Tipengo, SePaYa
4 Pulver’s 3 4 Heyku, HomeDine in, Pronto.ly, Veed.Me
Hillsven2 N/R 4 Mika, Fl3ur, Swifto, Qlika
Notes:
• Ranking includes Israeli and foreign micro VC funds (managing less than $50 million in capital)
• Amount of capital managed by foreign micro VC funds is not relevant (N/R) for this ranking

1. A foreign VC fund with an allocation to Israel
2. A foreign VC fund

For additional information:
Marianna Shapira, Research Manager, IVC +972-73-212-2339 marianna@ivc-online.com

About the authors of this survey:
IVC Research Center is the leading online provider of data and analyses on Israel’s high-tech, venture capital and private equity industries. Its information is used by all key decision-makers, strategic and financial investors, government agencies and academic and research institutions in Israel.
· IVC-Online Database (www.ivc-online.com) showcases over 11,000 Israeli technology startups and includes information on private companies, investors, venture capital and private equity funds, angel groups, incubators, accelerators, investment firms, professional service providers, investments, financing, exits, acquisitions, founders, key executives and R&D centers.
o Publications include newsletters; Daily Alerts; the IVC High-Tech Yearbook – the Israel High-Tech, Venture Capital and Private Equity Directory; surveys; research papers and reports; and interactive dashboards
· IVC Industry Analytics – analysis, research and insights into the status, main trends and opportunities related to exits, investments, investors, sectors and stages

 

1 Comment

  • Maybe there simply are more of them. That said, it bemuses me why there isn’t more activity in Israel. It can’t be solely regional instability.

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