Israeli Tech Startups Raised $453 Million in Q2 from VCs

Israeli high-tech firms raised $453 million in venture capital in the second quarter, down 6 percent from the first quarter, the Israel Venture Capital (IVC) Research Center said on Monday.

The amount raised in the April-June period was 20 percent lower than the year-earlier quarter, IVC, in cooperation with the Israeli office of consultancy KPMG, said in a report.

Israeli venture capital investments in the first half of 2012 reached $936 million, a decrease of 11 percent from the first half of 2011.

The share of capital raised from Israeli VCs fell to 24 percent in the first half from 28 percent a year earlier.

“The percentage of high-tech investment from Israeli venture capital firms is continuing to decline as capital available for new investments is shrinking,” said Koby Simana, CEO of IVC Research Center. “In light of their ongoing difficulties in raising new funds, we expect a further decline in VC high-tech investments throughout this year.”

Israeli high-tech companies are key drivers of the economy, helping to spur growth of 4.8 percent in 2011.

First investments by Israeli VC funds in the second quarter accounted for 18 percent of their total investments, the lowest quarterly share in a decade.

In the second quarter the Internet sector led capital raising for the second time in the past decade at 29 percent, followed by life sciences at 24 percent.

“The semiconductor sector has retrenched dramatically, both in terms of dollars invested and the number of deals made,” said Ofer Sela, a partner in KPMG’s technology group. “It dropped to a record low of 5 percent of the total amount invested in the first half of 2012. Historically, this sector has produced significant returns for Israel’s economy and local VCs.”

Reporting by Tova Cohen

Photo: Image of the flag of Israel courtesy of Shutterstock.