Israel VC Indicator Q1 2008
Number of Israeli VCs to decrease by 2010; VCs having hard time raising follow on fundsDOWNLOAD
Tel Aviv, 30 March 2008 - 75% of Israeli venture capitalists believe that by 2010 the number of active VCs in Israel will decrease. Of those, 59% believe the number of active VCs will decrease due to lack of successful funds raised, according to the Israel VC Indicator Survey, conducted by Deloitte Brightman Almagor in the last 2 weeks.
The survey reveals that 92% of Israeli venture capitalists say that the U.S. economic slowdown decreases Israeli VCs' fundraising ability. "VCs who are in the process of raising money for a follow on fund may find it extremely difficult to convince current and prospective limited partners to make investments and to reach the target that the VC has set for its fund, explains Asher Mechlovich, Israel TMT Leader at Deloitte Brightman Almagor. "This will result in a decrease in the number of active VCs in Israel".
As the stock exchanges around the globe continue to tumble, 49% of venture capitalists estimate that the stock markets fall will end within six months. 38% estimate that the stock markets fall will end within one year.
The survey further revealed that 59% of venture capitalists expect both investment valuations and exit valuations to decrease during the next six months. These are the highest expectations for valuations decrease since 2004. "Late stage startups will soon start to feel the negative impact of the stock markets' fall and the tightening of the IPO market", explained Mr. Mechlovich. "M&A activity might also be affected. As large technology, media and telecommunications companies brace for the possibility of a long recession, these potential startups acquirers might change their M&A strategy and acquire fewer startups. Less viable IPO option and dwindling M&A opportunities mean lower exit valuations."
59% of venture capitalists think that compared to last year it will it be more challenging for entrepreneurs to raise seed money. 74% of venture capitalists believe that the overall economic climate will worsen over the next six months. This is the highest expectation level for the economic climate to worsen since Quarter 4, 2001.
According to 40% of Israeli venture capitalists the most interesting deal flow opportunities during 2008 will be in mobile application. Other hot investment areas include cleantech (23%), online video (14%), casual gaming and social networks (each with 6%).
The highest expectations of transaction increase are in cleantech. 72% of venture capitalists expect an increase of transactions in this sector. Internet sector is second in expectations of transaction increase with 37% but also with a notable 34% who foresee a decrease of internet transactions. The medical devices sector continues to be among the most positive sectors with 36% expecting an increase of transactions in this sector.
Access the complete results of Q1, 2008 Israel VC Indicator Survey at: http://www.deloitte.com/il/vc
The purpose of the Israel VC Indicator Survey is to identify trends within the venture capital arena. Its objective is to give a comprehensive picture of the expectations of the Israeli VC community for the next six to twelve months. The survey is designed to explore relevant key aspects, such as economic and market conditions, deal activity and investment and managerial focus. The results produce a forward-looking measure of the overall sentiment in the Israeli venture capital community, which is extremely relevant to immediate deal flow.
The 24th Deloitte Brightman Almagor Israel VC Indicator Survey results for Q1, 2008 include a comparison, where relevant, to responses from previous surveys.
The VC Survey and Private Equity Surveys are a Deloitte initiative. The surveys have been conducted for some years, running concurrently in Israel, the United Kingdom, Germany, Spain, Portugal, Central Europe, Mexico, South Africa and India, to name but a few. Moreover, once a year, Deloitte also releases a Global VC Survey. The Global Survey purpose is to identify attitudes of venture capitalists and private equity investors regarding investing on a global basis and tracking long-term trends about the attitudes of international investing.
Responses for Israel VC Indicator Survey Q1, 2008 were collected from March 11th, 2008 through to March 23rd, 2008. The responses were collected from venture capitalists in Israel, including replies from the major VCs in the country.