TEL AVIV, April 29 (Reuters) - Israeli private high-tech firms raised $673 million in venture capital in the first quarter, up 53 percent from a year earlier, the Israel Venture Capital (IVC) Research Center said on Tuesday.
This is 16 percent lower than the record amount raised in the fourth quarter but is still exceptionally high, IVC, in cooperation with the Israeli office of consultancy KPMG, said in a report.
“The bullish U.S. capital market and capital raising for technology companies via IPOs on Nasdaq in the last 12 months have been drivers of venture capital, both globally and in Israel,” said Ofer Sela, a partner at KPMG’s technology group.
“Venture-backed revenue stage growth companies are raising substantially higher amounts of capital on average than in the past, positioning themselves for continued market expansion and significant acquisitions and/or Nasdaq IPOs.”
Israeli high-tech companies are key drivers of the economy, helping to spur growth of 3.3 percent in 2013. High-tech firms raised $2.3 billion in 2013, the highest amount in a decade, and are expected to raise about the same in 2014.
Israeli VC fund investments amounted to $106 million in the first quarter, down 26 percent from a year earlier and the lowest quarterly share on record, IVC said.
“High-tech’s success is clouded by the weakness of local venture capital funds, with investments continuing to shrink from quarter to quarter,” said Koby Simana, chief executive of the IVC Research Center.
The Israeli VC fund share of investments dropped to under 16 percent, while foreign VC involvement is increasing, he said.
“Prolonged absence of Israeli VC funds threatens high-tech industry growth in the longer run,” Simana said.
In the first quarter, the Internet sector attracted the largest share of funds at 39 percent - the highest for the sector since 2000. It was followed by software at 21 percent. (Reporting by Tova Cohen, Editing by Ari Rabinovitch)