Israeli high-tech firms raised $1.26 billion in the second quarter of the year, the second-highest quarterly amount in the past five years, IVC Research Center and law firm Zysman Aharoni Gayer & Co. (Zag S&W), which track the industry, said in a new report.
The money was raised by 157 tech companies in Israel. In the second quarter of 2016, 194 firms raised a total of $1.7 billion, the highest amount in five years.
The number of deals in the second quarter of this year, though slightly above the 155 deals reported for the previous quarter, remained 4 percent below the two-year average of 164 transactions, the report said.
The average financing round grew in the second quarter of 2017, reaching $8 million, compared with the $6.8 million average of the previous quarter, second only to the exceptional $8.8 million average in Q2/2016.
The first half of 2017 was the second-highest ever in terms of capital raising, as 312 Israeli high-tech companies attracted $2.3 billion, just below the strongest first half of 2016, when $2.8 billion was raised in 368 deals. Even so, the first half of this year showed a slight drop in terms of the number of deals, which was 8% lower than the corresponding past four-year average.
The figures show a 12 percent rise in deals backed by VC funds, following a series of declines in previous quarters.
“This growth in the volume of activity by the VC funds reinforces two parallel trends we saw in the last quarter,” said Koby Simana, the CEO of IVC Research Center. “On the one hand, the number of large deals, of over $20 million each, increased significantly, leading to a rise in the total capital raised in large rounds.
“We also see that the average small financing rounds (under $5 million) was up substantially in the second quarter, despite the fact that the number of such deals declined. Mid-range deals saw a minor increase both in terms of deal number and the average financing round.”
Larger investments per round
Simana said that the figures indicate “a real change” in the way capital is raised in the local market, and investors, especially venture capital funds, are choosing to make fewer investments but are prepared to invest larger amounts per round, “at almost any stage,” he said.
While mid-stage companies kept their leading position in the second quarter, raising $462 million or 37% of the total, 19 late-stage companies attracted $428 million, 34 percent of the total. This amount was better than the previous three weak quarters, the study said, but still under the exceptional $726 million raised in 25 late-stage deals in Q2/2016, representing 42 percent of total capital.
In Q2/2017, 38 seed companies raised $65 million, a noticeable increase in comparison to Q1/2017 ($35 million) and Q2/2016 ($41 million).
Software was the leading sector in the second quarter of the year, with $482 million or 38 percent of the total, as in the past four quarters. Life sciences was second, with $387 million, or 31 percent of total capital in Q2/2017.
If the trend continues, 2017 could be a record year for capital raising in the life sciences, Shmulik Zysman, managing partner at Zag, said.