Israeli venture capital funds seen raising $600 mln in 2013

TEL AVIV Mon Jan 28, 2013 6:09am EST

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TEL AVIV Jan 28 (Reuters) - The Israel Venture Capital (IVC) Research Center forecast local venture capital funds would raise $600 million in 2013, similar to 2012.

Israeli VCs raised $607 million in 2012, down 30 percent from 2011, IVC said on Monday in a report issued with consultancy KPMG.

Ofer Sela, a partner in KPMG's Israel affiliate, said fund raising is mostly being carried out by large VCs that are initiating follow-on funds and by relatively small funds that are industry specific or focused on early stage companies.

"There are VCs in-between that are no longer attracting new funds. These fund-raising trends are similar to those in the U.S. VC industry," he said.

Israel's high-tech sector is one of the world's largest.

Between 2003 and 2012, Israel's venture capital funds attracted $6.77 billion. The capital available for investment by Israeli VCs at the beginning of 2013 was $2.1 billion, of which $484 million is earmarked for first investments and the rest for follow-on investments.

Koby Simana, IVC's chief executive, said VC funds are facing serious challenges, not just in Israel but around the world as the allocation for venture capital investments continues to decline among institutional investors.

Israeli VC funds are also being challenged by fund raising competition from Asian VCs - mainly in China and India.

"There's room for optimism, however," Simana said. "While, on average, funds are raising less, the number of VC-backed companies is likely to rise over the next few years as more VC funds begin to raise capital." (Reporting by Tova Cohen)

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