By Oded Hermoni
Contrary to gloomy forecasts of a slowdown in foreign investment and venture capital, January was a good month for Israeli startups. About 32 companies secured a total of $346 million, about the same amount raised over the fourth quarter of 1999 and a third of the amount raised in the third quarter of 2000, during which a record volume of over a billion dollars was raised by Israel's venture capital market.
The figures are based on a study carried out by
and by accountant firm Ernst & Young, which is represented by the Israeli accountant firm Ernst Young, Kost Forer Gabbay.
The biggest amount was raised by
, which secured $30 million at a company valuation of $300 million. Next in line is probably
, which is currently wrapping up a financing round of $35 million.
In December 2000,
(formerly RtView) and
raised $20 million on average.
In fact, the rounds were generally fatter this January. Of the 32 financing rounds, 12 brought in $15 million each, and four came to $10 million each.
The average volume raised per startup significantly increased. In 2000, the average volume came to $6 million, and in January 2001 the average round totaled $10 million. But the number of rounds fell from 50 to 60 rounds per month in 2000 to 30 in January 2001.
These figures suggest that despite the gloomy forecasts, foreign investors have not withdrawn from the Israeli market. Although foreign investors are investing in less companies, the amounts kicked in are still major. Companies like Atrica and TdSoft, which belong to the upper rung in terms of money raised by Israeli startups in January this year, raised most of the money from foreign investors.
(NYSE:LEH) are hosting a conference in March, at which 36 Israeli communications and Internet startups will be presented. They were chosen out of a pool of 160 applicant startups. The startups are to be introduced to 250 American investment companies at the event, which will take place in San Jose, California.
Israel Export Institute chief Amir Hayek said that the conference will be attended by senior executives from
(Nasdaq:CSCO), which are participating as investors.
Major venture capital funds from the Silicon Valley, such as
are also expected to attend.
It should be noted that January 2001 was not a typical month. The deals announced in January are mostly the fruit of efforts begun in the last two months of 2000, the peak of the violent clashes between Israelis and Palestinians and the drops on the Nasdaq. But the end of the year is not a good time for the market anyway because the holiday season is not a good time to close deals. The January data is therefore a doubly nice surprise.
For all the encouraging data, the hi-tech industry in Israel and worldwide is in crisis. Capital is not less available and investor doors are slamming shut. In the fourth quarter of 2000, foreign investments in Israeli hi-tech dropped by 39%, whereas the total volume of investments declined by "only" 24%.
What of the future? Will foreign investors continue investing in Israel? "As long as there is good technology in Israel, I'll go on investing here," an American investor this month told the chief executive of one of the startups that raised $20 million. Some months ago the startup had to rescind plans to float on Nasdaq because of "Sharon's visit to the Temple Mount and the breakout of the
," as the manager put it.