Aug.20, 2012 | 9:38 AM–* In the first half of 2012, only 29% of venture capital investments in Israel involved early-stage start-ups, according to research conducted by lawyers Lior Aviram and Limor Peled from the firm Shibolet & Co. in collaboration with the firm Fenwick & West in Silicon Valley. Their study shows that the percentage of transactions involving younger companies has grown compared with the previous three years, but is still down from 2008, before the sub-prime crisis hit.
When the industry is stable, first-round investments should exceed subsequent funding rounds, argues Aviram. “But subsequent investment should only go to the best companies. Since the second half of 2008, the first round of investment hasn’t been the largest, or in other words, the industry is shrinking and that is a serious problem.” This trend is also evident in Silicon Valley, he says. But there first-round investments have rebounded to surpass follow-up investments, while in Israel the situation remains unchanged.
*When you add the small number of early-stage start-ups getting first-round investment with the increasing number of exits in Israel, you get a dwindling number of mid-size companies whose revenues exceed $20 million. According to data compiled by analysts Oren Raviv and Dan Yachin from market research firm IDC, more than 60 Israeli start-ups rake in more than $20 million per year. However, compared with data from 2011, that marks a 20-30% decline.
“The intermediate stage is problematic,” says Raviv. “More companies are sold and fewer of them enter the pool of firms that surpass the $20 million bar.”…Read More>>