Israeli Venture Capital
There is not much of a doubt that the United States venture capital market centered in Silicon Valley is the world leader, but would you be surprised to know that the Israeli venture capital market is a strong second place?
The Israeli venture capital market is booming. There is just no other way to view it. There are 80 active local funds with over $10 billion dollars under management. Next to Silicon Valley and the United States, Israel is the top dog in the venture capital market today. The country is a hot bed of hi-tech companies. Last year, a total of 462 Israeli hi-tech companies raised over $1.75 billion dollars for the Israeli venture capital market.
One lesson that can be learned from looking at the success of the Israeli venture capital market is the value of a strong local infrastructure toward attracting International venture capital. There was over $1 billion in International venture capital investment in Israel last year and this accounted for 61% of the total. Many international funds maintain offices in Israel, but others partner with local Israeli funds to target investments. This kind of cooperation is vital in the international venture capital arena because of cultural and legal differences.
One indication of the health of the local market is the large number of mergers and acquisitions taking place in Israel. As opposed to most other foreign economies outside the United States and Great Britain, Israel’s venture capitalists are very sophisticated and knowledgeable. They are movers and shakers and understand value added investment and merger networking as well as any group in the world today.
The maturity of the Israeli venture capital market is shown by the large number of successful exits being registered in the country. The number of IPO’s is increasing each year. In 2006 alone, 33 different companies netted $4.15 million in public offerings. Israeli companies are well represented on foreign stock exchanges now with 90 trading in the United States and another 40 in the London Stock Market. There are 70 companies trading on the NASDAQ alone, making Israel second only to the United States in number of companies on that exchange.
When all the facts and figure are considered, the small country of Israel is a giant in the venture capital field. Although they are still making many seed and start up deals, later stage deals are becoming more common as companies mature. The communication sector is the leader, especially in start ups, but all other sectors report healthy activity. Israeli venture capital could serve as a guide to other smaller countries trying to foster growth and a competitive world position by encouraging local venture capital.