Israel VC funds raised $526 mln in 2013, down 27 pct

TEL AVIV Tue Jan 14, 2014 4:32am EST

TEL AVIV Jan 14 (Reuters) - Israeli venture capital funds raised $526 million in 2013, down 27 percent from 2012, the Israel Venture Capital (IVC) Research Center (IVC) said on Tuesday in a report issued with consultancy KPMG.

Fund raising has slowed since 2011 with less capital being raised by fewer funds, Koby Simana, IVC's chief executive, said in a statement.

"Noteworthy too, is that the majority of first-time funds in 2013 were micro-VC funds, specialising in early stage startup investment," he said. "However, we believe this is not a new strategy for VC funds, but rather a reflection of the difficulties of fund raising by both first-time funds and established funds."

Ofer Sela, a partner in KPMG's Israel affiliate, said that in the late 1990s and the ensuing decade foreigners invested in Israel mainly through locally managed VC funds.

"The tremendous success of the Israeli technology market, together with the experience and confidence gained by some investors led to a change, and now a substantial number of foreign investors are investing directly in Israel's technology market through foreign VCs, corporate VCs or as individuals," he said.

Except for a handful of institutional investors, the local capital market is not taking part in the success of Israel's venture capital industry, Sela said. Foreign investors are reaping most of the gains, leading to insignificant capital being raised by local VC funds.

Capital available for investment by Israeli VCs at the beginning of 2014 amounted to $1.6 billion.

According to IVC, 30 Israeli VC funds are in the process of raising capital, with a targeted total of over $2 billion. However, only half are expected to raise capital in 2014 and it will not be more than $1 billion. (Reporting by Tova Cohen)

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