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IVC-KPMG Survey: Israeli Venture Capital Fund Raising - 2011 Summary

Marianna Shapira, Research Manager, IVC and KPMG SomekhChaikin


$796 million raised by Israeli VC funds in 2011. Less than $300 million remains for first investments

Tel Aviv, February 28, 2012. The following data are based on information collected by IVC Research Center and analyzed by IVC in cooperation with KPMG Somekh Chaikin Israel. Additional details about venture capital fund raising will be available in the IVC 2012 Yearbook due to be published in April.

Israeli venture capital funds were back to capital raising in 2011, after two very difficult years. No capital had been raised by Israeli funds in 2010, and only $256 million was raised in 2009, a 76 percent drop from 2008 levels. The $796 million raised in 2011 was a much needed breath of air for the local industry, though well short of amounts raised in vintage 2007-2008.

Seven funds that raised capital in 2011 are considered “micro funds.” These funds, with less than $30 million under management, invest small sums and generally focus on early stage candidates. Micro funds raised a total of $87 million in 2011, nearly 11 percent of total capital raised last year.

Of the 14 VC funds to raise capital in 2011, eight are managed by new entrants in Israeli venture capital, or are organizations raising their first VC fund. Six of the micro funds were raised by new players. Also new was Orbimed Israel, the first biomed fund raised as part of the Government of Israel’s plan to incentivize life science investments in Israel. As part of the program, the Government of Israel agreed to invest about $50 million in the fund, against investments by other LPs. While OrbiMed Advisors - the US investor that initiated the fund - has invested in Israel before, its establishment of an office and its first Israel-dedicated fund represent a major step-up in OrbiMed's Israeli activity.

Ofer Sela, a partner in KPMG Somekh Chaikin’s Technology group, explains that “globally, and also in Israel, the venture capital industry is shrinking in terms of number of entities raising new funds. Limited partners investing in venture capital firms are more selective in their investments and prefer investing in the most prominent VCs. The rest of the industry is re-inventing itself and trying to come up with an investment model that will attract limited partners with a lower burden of management fees and overhead costs and a less binding capital commitment for the limited partners.”

Historically, the growth of Israel’s venture capital industry is traced in six cycles based on fund raising vintage years that started in 1992 and peaked in 2000, when more than $2.8 billion was raised. The sixth and current cycle started in 2011, and with the previous three cycles (since 2000), Israeli venture capital funds attracted $10.7 billion, nearly 73 percent of the $14.7 billion that was exclusively allocated to investments in Israeli high technology by Israeli venture capital funds between 1992 and 2011.

“The ability of Israeli VC funds to raise follow-on funds in the current cycle running through 2012 and 2013 will have a strong impact on overall performance and the future of Israel's high-tech sector, especially startups,” said Koby Simana, IVC's CEO. “More than 20 funds are currently in the process of raising capital, many of them by veteran venture capitalists who are raising continuing funds. Underway, too, is capital raising by a number of new players, mostly micro funds which are likely to be successful in light of the recent micro and angel fund trend. Overall, we forecast that $800 million will be raised in 2012 by Israeli VC funds for investment in Israeli high-tech companies, maintaining the same level as in 2011,” Simana concluded.

According to IVC estimates, capital available for investment by Israeli venture capital funds at the beginning of 2012 was slightly under $1.66 billion. Of this amount less than $300 million is earmarked for first investments. The remainder is reserved for follow-on investments.

Ofer Sela of KPMG adds, “Over the last few years, the Israeli high-tech industry has become more global in terms of investments with significant capital being attracted from non-Israeli venture capital firms. Record high investments in Israeli companies in 2011 indicate that foreign investors are finding Israel attractive, a trend we expect to continue.”

According to the latest IVC-KPMG survey, in 2011 Israeli companies raised $2.14 billion, 25 percent of which came from Israeli venture capital funds. The remainder came from other Israeli and foreign investors. Considering the needs of the industry, and the fact that the capital available to local VC funds should stretch over the next four years, the gap between supply and demand is clear – the Israeli VC industry is about a billion dollars short.

More information about capital raised will be available in the IVC 2012 Yearbook - the Israel High-Tech, Venture Capital and Private Equity Directory to be published in April. The Israeli Fund Raising Scorecard, continually updated, is available at IVC-Online.com.

For additional information, please visit: www.ivc-online.com.


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

About the authors of this survey:

IVC Research Center is Israel’s leading research center providing business leaders with an unmatched wealth of data on Israeli high-tech, venture capital and private equity industries. IVC products and services are used regularly by high- tech companies, venture capital funds, private investors, financial investors and institutions, as well as public entities such as the Office of the Prime Minister, the Central Bureau of Statistics, the Bank of Israel and the Office of the Chief Scientist.

IVC owns and operates the IVC Online Database (www.ivc-online.com) containing over 8,500 Israeli high-tech companies, venture capital funds, investment companies, angels and technology incubators, as well as news updates and lots more. Among IVC products and publications are the IVC Quarterly Survey, which for over 15 years has been analyzing capital raising trends by Israeli high-tech companies, as well as the most comprehensive guide to Israeli high technology and venture capital – the IVC 2012 Yearbook, due to be published April 2012.

KPMG SomekhChaikin’s technology professionals offer insights and experience accumulated from a long history of work with technology and life science companies. Through a global network of highly qualified professionals in Israel, the Americas, Europe, the Middle East, Africa and Asia-Pacific, KPMG helps clients address the opportunities and challenges driven by new business models such as cloud computing mobile services and others. KPMG is a global network of professional firms providing Audit, Tax and Advisory services. KPMG operates in 146 countries and has 140,000 people working in member firms throughout the world.