Last updated July 29th 2015
The Israeli high-tech industry has broken yet another record: In the second quarter of 2015, Israeli startups raised a striking $1.12 billion from investors, the largest quarterly investment in the history of the Startup Nation. The total, raised by 179 Israeli startup and high-tech companies, slightly exceeded the former record, $1.11 billion, set in the fourth quarter of 2014.
That means that if you take the first six months of this year, 342 Israeli high-tech companies attracted a record $2.1 billion, compared to the $1.6 billion raised by 334 companies in the first half of 2014, and the $878 million invested in 307 companies in the first half of 2013, according to the IVC Research Center.
The average financing round in the first half of 2015 provides strong proof of Israel’s technological preeminence: $6.2 million, compared to $4.8 million in the first half of last year, and $2.9 million in the first half of 2013.
One funding round that stands out in this second quarter is that of Israeli cyber-security startup Checkmarx, which raised $84 million from Insight Venture Partners in June.
Commenting on the news, Ofer Sela, partner at KPMG Somekh Chaikin’s technology group, said in a statement: “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’ [worth at least $1 billion] that are substantial and mature.”
However, VCs seem to be faring worse: In the second quarter of 2015, investments in VC-backed deals decreased significantly, with 99 deals totaling $486 million – the lowest share for VC-backed deals in six years, at 44 percent.
The sharp rise in foreign investment could explain that. According to an analysis by IVC and KPMG, foreign private equity funds and international corporate investors were responsible for $477 million (or nearly 43 percent) of the total investments in startups during the second quarter of 2015.
“There’s room for more than just VC funds”
Koby Simana, CEO of IVC Research Center, believes that the interest shown by private equity investors in growth-stage companies is yet another indicator of the Israeli technology and venture capital industries’ 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,” he said in a statement. “The industry needs a variety of investors and investment models to support companies throughout various stages.”
Sela added that Asian investors are particularly interested in Israeli startups. “Investors from Asia are investing in an increasing number of Israeli growth companies, adding to the overall amount of cash available for market expansion,” he stated. “Overall, Israeli portfolio companies are priced much more reasonably than Silicon Valley companies, making Israel an attractive location for both investments and acquisitions.”
Photos, infographics: IVC Research Center