The anemic performance of the Israeli economy in the first half of 2015 has not deterred investors – just the opposite, it appears. A survey released by US management firm Deloitte and the National Venture Capital Association (NVCA) shows that investors have a great deal of faith in Israel’s tech economy – rating it the second best place to invest in the world, outside Silicon Valley.
The 2015 Global Venture Capital Confidence Survey is an annual survey of venture capital, private equity and growth equity investors around the world, seeking to gauge how confident they are in the performance of economies in various technology areas, including mobile, cloud, enterprise software, robotics, energy technology, and more.
Thirty-seven percent of the 200+ investors (representing the largest venture capital and private equity investment funds in each country) were from the US, with firms managing funds ranging from $1 million to nearly $50 billion. This is the eleventh year Deloitte conducted the survey.
Asked to rate their confidence level in each of ten countries that attract the most tech investments on a scale of 1 to 5, the US scored first, with a 4.17 rating, with Israel coming in second at 3.90. Israel was followed by Canada (3.60), China (3.53), and the UK (3.51). Other countries that were part of the survey include Brazil, Finland, Sweden, Japan, and Russia.
The survey also broke down the US findings into top tech locations, including Silicon Valley, New York, Boston, Los Angeles, and Chicago. Silicon Valley rated a confidence level of 4.28, followed by New York, at 3.86 – lower than Israel’s 3.90.
Compared to the 2014 survey, investors were more confident investing in Israel this year than last. Investors in the US and Japan expressed greater confidence in Israeli investments (5% and 7% more confident respectively), while investors in Brazil were 24% more confident in Israel’s tech economy. Overall, confidence in Israel worldwide was up 5% – although among Israelis themselves, confidence in the local economy was down 5% compared to 2014.
If they weren’t so sure about how their own economy would perform, Israeli investors were very optimistic about the rest of the world. While investors in almost every one of the ten countries said they had significantly less confidence in the global economy’s expected performance next year compared to this year’s performance, Israelis were quite positive about the prospects for 2016 – saying they were 18% more confident in the economy’s positive performance next year than they were this year. US investors were just 1% more confident – whole investors everywhere else expected poorer performance from the global economy in the coming year.
Israelis’ optimism extended to individual countries that have had their share of economic woes this year – including China. Despite the drastic fall of shares on Chinese stock markets this year. Investors in almost every country expected better economic performance in China next year – with US investors 12% more confident in China’s economy than they were in the previous survey, and UK investors 17% more confident. Israeli investors, however, were 43% more positive this year that China’s economy would perform well next year than they were about this year’s performance when polled last year.
Israelis showed similar confidence in economic performance in India (24% more confident this year than last), Japan (7%), the UK (12%), and the US (4%), The only places where confidence levels fell were Brazil (almost all investors expressed the same sentiment) and at home.
In another domestic vs. foreign discrepancy, Israeli investors were 3% less confident in the ability of tech firms to raise funds from domestic funds – but they were 18% more confident that those firms could raise money abroad. That was a higher level of optimism in international fundraising than among investors anywhere else.
The survey also polled investors on several public policy issues related to investing, When asked if the government should initiate tax incentives or credits to encourage investing, 63% of Israeli investors responded positively. Forty six percent of Chinese investors sought those incentives from their government as well, while in the UK and the US, only 22% and 21% of investors said they needed them. However, it appears that the tax burden in Israel is easier for investors in Israel to bear than it is elsewhere; while 22% of UK investors, 26% of US investors, and 54% of Chinese investors wanted their governments to lower taxes, only 16% of Israeli investors were looking for tax relief, the survey showed.
“Despite a hot IPO market and the proliferation of appealing investment opportunities across industries, this data shows that investors believe that the government needs to do more to ensure they can fully capitalize on the prospects ahead,” said Jim Atwell, national managing partner of the Emerging Growth Company practice, Deloitte & Touche LLP. “Technology continues to generate a great deal of excitement on a global level, especially with today’s optimal market conditions and despite the widening gap in governmental support.”