Venture capital in Israel

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Venture capital in Israel refers to the financial capital provided to early-stage, high-potential, high risk, growth startup companies based in Israel. Israel's venture capital industry was born in the mid-1980s and has rapidly developed since. Israel currently has about 70 active venture capital funds, of which 14 are international VCs with Israeli offices.[1] Israel's venture capital and incubator industry plays an important role in the booming high-tech sector that has been given the nickname "Silicon Wadi", considered second in importance only to its Californian counterpart, the Silicon Valley.[2]

In 2008, venture capital investment in Israel stood at $1.9 billion, a 19% increase over the previous year.[3] Twenty Israeli venture capital funds raised $796 million in 2011, compared with $256 million in 2009.[4]

History[edit]

Israel's venture capital industry was born in 1985,[5] when the first Israeli venture capital fund,[6] Athena Venture Partners, was founded by Major-General Dan Tolkowsky, the past Chief of Staff of the Israel Air Force;[7] Dr. Gideon Tolkowsky; and Frederick R. Adler, a pillar of the US venture capital industry who had conceived the notion of taking Israeli High-tech companies public on NASDAQ. Subsequently, in 1990, Gideon Tolkowsky and Yadin Kaufmann founded Israel's second VC firm, "Veritas Venture Capital Management",[8] whose main investors were Anglo American Corporation of South Africa and De Beers. The success of the Venture Capital industry in Israel continued with Yozma (Hebrew for "initiative"), a government initiative in 1993 offering attractive tax incentives to foreign venture-capital investments in Israel and promising to double any investment with funds from the government.[9] As a result of their efforts, Israel’s annual venture-capital outlays rose nearly 60-fold, from $58 million to $3.3 billion, between 1991 and 2000. The number of companies launched using Israeli venture funds rose from 100 to 800. Israel’s information-technology revenues rose from $1.6 billion to $12.5 billion. By 1999, Israel ranked second only to the United States in invested private-equity capital as a share of GDP. It also led the world in the share of its growth attributable to high-tech ventures: 70 percent.[9] According to the OECD, Israel is also ranked 1st in the world in expenditure on Research and Development (R&D) as a percentage of GDP.[10]

Though Israel's venture capital industry played an important role in the high-tech sector, the financial crisis of 2007-2010 also affected the availability of venture capital locally. In 2009, there were 63 mergers and acquisitions in the Israeli market worth a total of $2.54 billion; 7% below 2008 levels ($2.74 billion), when 82 Israeli companies were merged or acquired, and 33% lower than 2007 proceeds ($3.79 billion) when 87 Israeli companies were merged or acquired.[11]

Characterization[edit]

Israel’s venture capital industry has about 70 active venture capital funds, of which 14 international VCs with Israeli offices. Additionally, there are some 220 international funds, including Polaris Venture Partners, Accel Partners, Greylock Partners and YL Ventures, that do not have branches in Israel, but actively invest in Israel through an in-house specialist.

In 2009, the Life Sciences Sector led the market with $272 million or 24% of total capital raised, followed by the Software Sector with $258 million or 23%, the Communications sector with $219 million or 20%, and the Internet sector with 13% of capital raised in 2009.[11]

Roughly 78%-88% of investments that reached Israeli high-tech companies in 2001-2008 were by Israeli VC firms (the 38%-49% above) or foreign or other entities in syndication with Israeli VC firms: 37%-50%.[12]

Technological business Incubators[edit]

In the early 1990s, the Israel government created a technological business incubator program (Hebrew: חממה טכנולוגית) to leverage the strengths of approximately 750,000 scientists, engineers, and physicians who had just arrived from former USSR. Israel's Office of the Chief Scientist (OCS), a division of the Industry, Trade and Labour Minister of Israel, started six "incubators" designed to foster seed and early stage technology development through entrepreneurship. Today there are 24 such incubators located throughout Israel, and 65 percent of the projects are science-related research and development.

In 2007, incubator companies raised $435 million in private funds, up 74 percent from 2006. Currently, the OCS allocates approximately $1 billion per year to incubators and other programs that encourage technology development[13]

Dun and Bradstreet venture capital ranking[edit]

The 2011 Dun and Bradstreet venture capital ranking in Israel includes:[14]

Name Capital Managed
$ million
Notable Investments / Exits
Pitango 1300 AudioCodes, dbMotion, MobileAccess, Provigent, Radcom, Radware, SuperDimension, Retalix, Traiana, Ventor, VocalTec
Star Ventures 1000 Alvarion, BigBand Networks, Ceragon Networks, Radcom, Vizrt, Ciena
Jerusalem Venture Partners (JVP) 850 Allot, Chromatis, Fundtech, Cogent, Jacada, Precise, XMPie, Sheer Networks, QlikTech, Cyber-Ark, Qlipso, Altair
Evergreen 700 Aladdin Knowledge Systems, Creo, Commtouch, Compugen, M-Systems, RADVision
Gemini 700 Ceragon Networks, Mellanox, nLayers, Traiana, Riverhead Networks
Vertex Venture Capital 600 Actimize, SHL Telemedicine, Terayon Communication, Voltaire InfiniBand, PowerDsine
Carmel Ventures 600 NICE Systems, Actimize, Followap, ECI Telecom, Tecnomatix, Red Bend Software, OpTier, Mformation, Kontera
Genesis Partners 600 ClickSoftware, FilesX, ProSight, Tescom, Allot, AudioCodes, Kidaro, Fundtech, Wintegra
Infinity Fund 600 Shopping.com, Scitex Vision, Saifun Semiconductor, Identify Software, TeleMessage, Cyber-Ark, Teledata Networks
Giza Venture Capital 600 Zoran Corporation, M-Systems, DSPC, Libit, Flash Networks, ActionBase

See also[edit]

References[edit]

  1. ^ "Venture Capital in Israel"
  2. ^ "Land of milk and start-ups", The Economist, 2008-03-19, retrieved 2008-03-22. 
  3. ^ "International Venture funding rose 15 percent in 2008, VentureBeat, February 18, 2009
  4. ^ "Israeli VC Funds Seen Raising $800M This Year". peHUB. 28 February 2012. Retrieved 4 March 2012. 
  5. ^ "Athena". Bloomberg Businessweek. Bloomberg. Retrieved 11 March 2013. 
  6. ^ Kalish, Shlomo. "אם אשכחך ירושלים, ישכח ההיי-טק הישראלי". Personal Column. Retrieved 11 March 2013. 
  7. ^ "Dan Tolkowsky". Israel Air Force History. IDF. Retrieved 11 March 2013. 
  8. ^ Tolkowsky, Gideon. "Veritas". Veritas VC. Retrieved 11 March 2013. 
  9. ^ a b Gilder, George, "Silicon Israel — How market capitalism saved the Jewish state", City Journal -Summer 2009 19 (3), retrieved 2009-11-11 
  10. ^ OECD Factbook 2010: Economic, Environmental and Social Statistics
  11. ^ a b Venture Capital in Israel
  12. ^ Venture Capital in Israel in IVA
  13. ^ .Israel's High-Tech Boom, The Jewish Policy Center, Summer 2008
  14. ^ "Dun's 100 2011 — Venture Capital Funds", Dun & Bradstreet Israel Ltd., retrieved 2012-05-03 

External links[edit]