TEL AVIV, July 23 (Reuters) - Israeli high-tech firms raised $493 million in venture capital in the second quarter, up 4 percent from the first quarter, the Israel Venture Capital (IVC) Research Center said on Tuesday.
The amount raised in the period was 3 percent higher than the second quarter of 2012, IVC, in cooperation with the Israeli office of consultancy KPMG, said in a report.
“The uptick in investments in the second quarter reflected in part relatively robust activity in the medical devices segment,” said Ofer Sela, a partner at KPMG’s technology group.
“Yet, more than two years after the launch of the Israeli government initiative to promote investments in the life sciences, the sector as a whole is still not showing the expected results.”
Israeli high-tech companies are key drivers of the economy, helping to spur growth of 3.2 percent in 2012. IVC expects a similar level of capital raising in 2013 as in 2012.
Israeli VC fund investments accounted for $118 million in the second quarter, the lowest quarterly amount in three years and down from $147 million in the first quarter.
“More than 60 percent of financing rounds were with the participation of Israeli VC funds, despite the fact that the Israeli VC share in capital invested declined,” said Koby Simana, IVC Research Center’s chief executive. “Local funds play a major role in driving high-tech financing deals forward, even when the bulk of capital is sourced from foreign investors.”
In the second quarter, the life sciences sector attracted the largest share of funds at 25 percent, followed by the Internet sector at 18 percent.
“Israel is clearly falling behind the U.S. in the relative level of biotechnology investments,” Sela said. “The Israeli government needs to continue to intervene in order to create the right ecosystem for Israeli biotech companies to flourish and prosper, as it did with the venture capital industry in the early ‘90s.” (Reporting by Tova Cohen)