According to a report released recently by IVC Research Center, 166 Israeli startup companies raised a whopping $994 million from venture capital firms in the first quarter of 2015, the second-best result in the last decade. Even more telling, this figure was 48 percent higher than the $673 million raised by 160 companies in the first quarter of 2014.
However, it is still 10 percent below the record high $1.1 billion invested in 184 companies in the fourth quarter of 2014.
The average company financing round averaged at $6 million, equal to the previous quarter’s average, but well above the $4.2 million average raised in the first quarter of 2014. The IVC report also shows that in the first quarter of 2015, 91 VC-backed deals accounted for $832 million – 84 percent of the total capital invested. The average VC-backed deal peaked at $9.1 million, compared to $7.7 million and $6.1 million in the fourth and first quarter of last year, respectively.
And the figures show foreign investment is still leading, proving how high up on international investors’ lists Israeli startups have become. Indeed, the vast majority of investment in Israeli startups is foreign: Israeli venture capital firms invested only $180 million in local startups and high-tech companies, or 18 percent of all investments, in the first quarter this year.
The research also shows Internet companies are still leading the pack in terms of deal flow: The sector experienced its best quarter ever with $343 million raised by 44 companies, a 35 percent slice of the funding pie. The life sciences and software sectors followed, accounting for 22 percent and 19 percent of total capital raised, respectively.
“The increase in high-tech capital raising is not coincidental, but directly reflects the trend toward growth company investments and higher valuations of mid- and late-stage companies,” Koby Simana, CEO of IVC Research Center, said in a statement.
He further commented that “up to a year ago, we were accustomed to seeing average financing rounds of $3 million to $4 million in the internet sector. In recent quarters though, we’ve been observing a distinct rise in the average internet financing round. This trend is even more evident among growth-stage internet companies for which the average deal jumped from $6 million about a year ago to $16.3 million in the first quarter of 2015.”
Partly responsible for the high investments in the first quarter of 2015 were content marketing startup Taboola, which raised $117 million in February; and mobile app search company Quixey, which raised $60 million in a funding round led by Chinese e-commerce group Alibaba. But IVC’s analysis shows that “those were not unique events,”Koby Simana. “They fit in well with the activity surrounding the internet sector and the rise in the number of early-stage investments. These parallel trends mostly feed each other as the increase in growth-stage internet companies attracts more entrepreneurs and investors into the sector.”
Simana predicts that these success stories “will drive the volume of growth deals as well as contribute to increase seed-stage investments, which up until last quarter, were on the decline.”