New funding for Israeli high-tech companies reached $1.19 billion this quarter, marking the second-highest quarterly level in a decade, the IVC Research Center announced Wednesday. That brings the amount of capital raised by Israeli high-tech firms this year to $4 billion—up 27 percent when compared to last year.
The largest chunk of that capital came from Ormat Technologies, a leader in geothermal and other alternative energies, which raised $204 million in a private bond placement last month. IVC found that 142 deals closed in Q3 2016, a 26 percent drop from the previous quarter.
“While we observe a decline in the number of investments, we don’t believe that the local ecosystem is going to be dramatically impacted by the global downtrend in the long run, since the flow of quality deals continues to be strong and new growth investors are investing in these deals, providing a wider horizon to such companies, both in terms of the type of potential exit and valuation,” Ofer Sela of the consulting firm KPMG Somekh Chaikin told Globes. “We expect the IPO market in the U.S. to be much stronger at the beginning of 2017, which will keep pushing both investors and VC-backed companies to continue nourishing the local ecosystem, alongside more traditional industries that are looking to reinvent themselves through innovative solutions.”
The health of the Israeli high-tech industry is especially notable when compared with that of other countries, said IVC Research Center CEO Koby Simana, who noted a “global downtrend in VC investment that has been going on for over a year. Venture capital investors have put on the brakes in nearly every country, with U.S. capital raising, for example, declining for the fifth quarter in a row. In Israel, we have so far been going against this trend, exceeding former capital raising records.”
Funding specifically from venture capital firms decreased 24 percent year-on-year in Israel, while equivalent funding levels were flat from Israeli VC firms in particular. Nonetheless, said Simana, “we expect 2016 to close as a record year in terms of capital raising, so short of a dramatic surprise in the coming months, we are still far from declaring that the global VC crisis has hit Israel.”
The average funding transaction in 2016 reached $7.8 million, Globes noted, a significant improvement over the $6.4 million average in the first nine months of 2015. The third quarter of 2016 was even better, averaging $8.4 million—and still a solid $7 million when the Ormat deal was disregarded.
[Photo: Moshe Shai / Flash90]