January 14, 2013 / 1:11 PM / in 5 years

UPDATE 1-Israeli tech firms to see unchanged level of capital in 2013

* High-tech firms raise $1.92 bln in 2012 vs $2.14 bln in 2011

* Israeli VC fund investments down 19 pct to $516 mln (Adds more comments from IVC CEO)

By Tova Cohen

TEL AVIV, Jan 14 (Reuters) - Israeli private high-tech firms are expected to raise about the same amount of capital in 2013 as in 2012 as foreign and corporate investors increase their activity, offsetting a decline in Israeli venture capital investment.

The Israel Venture Capital (IVC) Research Center said on Monday high-tech companies raised $1.92 billion in 2012 from local and foreign investors, down 10 percent from an 11-year high of $2.14 billion in 2011. The life sciences sector attracted the largest share of investments at $497 million.

Firms raised $494 million in the fourth quarter, up 5 percent from the third quarter but down 14 percent from the year-ago quarter, IVC, in cooperation with the Israeli office of consultancy KPMG, said in a report.

Israeli VC fund investments totalled $516 million in 2012, 19 percent below the $638 million invested in 2011.

“While investment by Israeli VC funds is shrinking, foreign VCs as well as corporate and private investors are gradually increasing their activity,” said Koby Simana, chief executive of IVC. “As a result, I‘m optimistic about the high-tech industry’s chances of maintaining the current level of capital raising in the coming year.”

Israeli high-tech companies are key drivers of the economy, helping to spur growth of 3.3 percent in 2012.

Simana said a strong indication that the coming years will be “fruitful” for Israeli high tech companies can be found in early stage and seed rounds that took place in 2012. Seed companies raised $146 million, up 55 percent from 2011, while early stage companies raised $635 million, up from $562 million.

“These companies will evolve and grow and the existing investors and other investors will back the successful companies in the future. Thus, you can expect significant follow-on investments in those companies in the coming years,” he told Reuters.

Also, 2012 was a record year in terms of the number of companies raising capital and this is a good indication that there is interest in early stage investments, Simana said.

Ofer Sela, a partner in KPMG’s technology group, said the Internet proved to be the most attractive sector as more than twice as many early-stage Internet companies were funded in 2012 than in 2011.

“Technology developments in recent years in both cloud-based infrastructure and content delivery platforms have enabled Internet companies to mature and develop their intended technology with greater capital efficiency than any other sector,” he said. (Editing by Steven Scheer)

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