$914 Million for Israeli VC Funds in 2014

15 January, 2015

"The record number of Israeli portfolio companies with valuations of hundreds millions of dollars, together with positive sentiment in NASDAQ, helped the VC firms to show good returns"

“The record number of Israeli portfolio companies with valuations of hundreds millions of dollars, together with positive sentiment in NASDAQ, helped the VC firms to show good returns”

In 2014, 12 Israeli venture capital funds raised $914 million, the most raised by Israeli venture capital funds in six years, According to a new study made by IVC Research Center in cooperation with KPMG Somekh Chaikin Israel. The year’s fund raising was up 68 percent from the $544 million raised by 11 VC funds in 2013, and was 18 percent above the 10-year average of $777 million.

Israeli VC Funds raisings. Source: IVC Research
Israeli VC Funds raisings. Source: IVC Research

Four veteran Israeli VC funds managed to raise more than $100 million each and accounted for 64 percent of total capital raised in 2014. Carmel Ventures’ fourth fund attracted the largest amount – $194 million, while Magma raised $150 million for its fourth fund, less than two years after closing its previous $110 million fund. JVP made a first closing of $160 million of a targeted $180 million for its seventh fund. In addition, Vintage’s seventh fund, a fund of funds, attracted $144 million, 50 percent of which is being allocated to Israeli investments.

The average fund size in 2014 reached $76 million, 55 percent above 2013’s $49 million average, and up 46 percent from the $52 million of 2012. The increase reflects the raising of more medium sized funds and fewer micro VC funds than in each of the previous two years. On the other side of the spectrum, there is an awakening of late and growth stage VC funds that focus on companies with proven product viability and expanding sales.

Many such companies have the potential to develop into large global corporations and are stimulating the demand for more late stage funding. Qumra Capital, founded by former Evergreen partners Boaz Dinte and Erez Shachar, and Agate Korea are two examples of firms active in the growth market. In addition, at least five more funds are in various stages of capital raising and are focused at late stage companies and growth funding. Interestingly, funds in this group opt for a wide variety of investment mechanisms that include growth venture capital, venture lending, mezzanine financing and private equity.

Ofer Sela, partner in KPMG Somekh Chaikin’s Technology group, explains that “The record number of Israeli portfolio companies with valuations of hundreds millions of dollars, together with positive investor sentiment in NASDAQ, has made it easier for VC firms to show good returns and raise capital. In the past 24 months, global and Israeli VC returns have been among their highest ever. This has encouraged new limited partners from China and Israeli institutional investors to join the more traditional investors in Israeli VCs, such as university endowment and US public pension funds.”

Marianna Shapira, Research Manager at IVC, said, “Our data show that 19 funds, including six new VC players, are currently in the process of raising capital with an aggregate target of $1.8 billion. We expect that the majority of these funds will raise capital in 2015, and believe as much as $1.2 billion could be raised by the end of the year. We’ve already seen the first $200 million, with the 83North closing announced last week.”

 

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