‘Israeli portfolio companies are priced more reasonably than Silicon Valley companies, making Israel an attractive location for investments and acquisitions.’
New records for Israeli high-tech investments as 179 companies raise $1.12 billion in the second quarter of 2015, according to the IVC-KPMG Israeli High-Tech Capital Raising Survey. The quarterly amount exceeded former record high $1.11 billion invested in Q4/2014.
“Fifty percent of the amount raised during this quarter, and even more since the beginning of 2015, results from large deals of $20 million or more raised per round. The overall number of growth companies attracting investments continues to increase quarter over quarter, reflecting the health of the venture-backed ecosystem in Israel and the patience of investors supporting their portfolio companies to complete homeruns and grow into ‘Unicorns’ that are substantial and mature,” said Ofer Sela, partner at KPMG Somekh Chaikin’s Technology group.
In the first half of 2015, 342 Israeli high-tech companies attracted $2.1 billion in investments compared to $1.6 billion raised by 334 companies in the same time frame the year before.
IVC-KPMG’s analysis of investors by type showed that foreign private equity funds and corporate investors were responsible for $477 million or nearly 43 percent of the total investments in Q2/2015.
“Most of the increase in capital raising in the second quarter can be attributed to two exceptionally large deals, where private equity funds invested in growth-stage companies,” said Koby Simana, CEO of IVC Research Center. “Moreover, an investor profile analysis we conducted shows an impressive increase in the number of foreign private equity funds investing directly in Israeli technology companies – i.e., in deals where the equity capital is placed directly in the company, rather than shareholder equity changing hands.”
Simana says the interest shown by private equity investors in growth stage companies is another indicator of the Israeli technology- and venture capital industry’s evolvement and maturity.
“If we want the local high-tech industry to continue growing and see more large-scale, mature companies emerge, there is room for technology investments from more than just VC funds – local or foreign. The industry needs a variety of investors and investment models to support companies throughout various stages. Private equity funds and international conglomerates are the kind of investors we want to see supporting growth companies, and we have lately found that, indeed, the number of growth stage technology companies in Israel is rapidly increasing,” he said.
The software industry led capital raising this quarter with $487 million (44%) invested in 50 companies. The amount was the largest for the sector.
And, Israel continues to be a top Asian destination for startup investments.
“Investors from Asia are investing in an increasing number of Israeli growth companies, adding to the overall amount of cash available for market expansion,” says Sela. “Overall, Israeli portfolio companies are priced much more reasonably than Silicon Valley companies, making Israel an attractive location for both investments and acquisitions.”