Israeli VC fundraising tops $1.2bn in 2005

Just six Israeli venture capital funds accounted for the bulk of fundraising last year, amid increasing appetite from foreign pension funds.

Israeli venture capital funds raised $1.2 billion (€993 million) in 2005, an increase of 40 percent on the $724 million raised in 2004, according to research conducted by the IVC Research Center.
 
The bulk of the total was corralled by six new Israeli venture capital funds that completed their fundraising in the course of 2005, said Tel Aviv-based IVC. 
 

We had some bad years between 2000 and 2003 when more capital was returned to investors than was raised, but there is now a much better environment for raising capital in Israel.

Efrat Zakai, director of research, IVC Research Center

The six funds were: Benchmark Capital’s $250 million Benchmark Israel III vehicle; Carmel Ventures’ $200 million second fund, Carmel Ventures II; Israel Healthcare Ventures’ $140 million second fund dedicated to life sciences; Sequoia Israel’s third fund, which closed on $200 million; Genesis Partners’ third fund, Genesis Partners III, which received commitments of $150 million; and Giza Ventures’ final close of its fourth fund, Giza Venture IV, adding $30 million to the $120 million raised in 2004.
 
There were also first closings of funds being raised by four Israeli venture capital firms, including $120 million for Tel Aviv-based Vertex Venture Capital’s Vertex Israel III vehicle and $80 million for life science-focused Medica-Poalim III, which has a target of $120 million.
 
Efrat Zakai, director of research at IVC, told PEO that the performance figures for 2005 showed a continuation of the bounce back from the doldrums of 2000 to 2003, which began in 2004. “We had some bad years between 2000 and 2003 when more capital was returned to investors than was raised, but there is now a much better environment for raising capital in Israel,” she said.
 
IVC said that the last two years has also seen an increase in the number of foreign, specifically US, pension funds involved in the Israeli venture capital market. These included the Californian State Teachers’ Retirement System (CalSTRS), the California Public Employees’ Retirement System (CalPERS), the NY State Retirement System, Oregon Public Employees Retirement Fund, the Pennsylvania State Employees Retirement System and TIAA-CREF.
 
Zeev Holtman, chairman of the IVC Research Center and CEO of Giza Ventures, said in a release that local investors were “generally on the sidelines” and that such “local inactivity raises concern that Israeli institutions will miss out on the new wave of promising investment opportunities”.
 
According to IVC estimates, an additional $1 billion is expected to be raised in 2006 by Israeli venture capitalists for investment in technology businesses in the country.