In 2015, Singulariteam, a medium sized Israeli fund founded by Moshe Hogeg and Kenges Rakishev, topped all VC fund investors by making 12 first investments, according to report by IVC Research Center and APM & Co. Law Firm analyzing first investments in Israel by venture capital funds in the past five years, and ranking the most active venture capital funds which invested in Israel in 2015.
Singulariteam’s investments makes a slight increase for the number of deals made by the top ranked fund, compared to 10 first investments made in 2014 by the year’s Most Active Fund, JVP.
Singulariteam manages $152 million via three funds – two early stage funds and a new growth stage fund. The first investments made in 2015 were funded by Singulariteam II, a $102 million early-stage fund closed in 2014.
Placing second, with nine first investments each, were Israeli fund Carmel Ventures and American fund Innovation Endeavors, co-founded by Google’s Chairman, Eric Schmidt and Dror Berman.
Carmel, with $802 million under management, invested from its vintage 2014 fourth fund. The third place is also shared by two funds, Israeli Magma and First Time, with eight investments each.
Magma, with $450 million under management, invested from its fourth fund, raised in 2014. First Time is a vintage 2014 fund, managing $60 million and managed by TheTime technological incubator’s founders, focused mainly on supporting the incubator’s graduates with supplemental funding.
The Most Active Micro VC fund was local fund OurCrowd First, with seven first investments from its vintage 2014 $10 million fund.
Following OurCrowd was lool Ventures with six investments from a $33 million fund, closed in 2011. Israeli funds InovGate, Peregrine and Elevator Ventures tied for third place, with five investments each. No foreign micro VC funds have made it to the top of the chart.
The IVC-APM report, which analyzes trends relating to first investments by foreign and Israeli VC funds in Israel, points to a decrease in the total number of first investments, as well as the number of active VC funds in 2015, compared to 2014’s record numbers.
The downtrend is a direct result of foreign funds’ relative lowered activity in 2015, following a similar global trend, while Israeli funds actually increased their activity in 2015, both in the number of funds and number of deals made.
However, despite the opposite trends, foreign VC funds maintained their leading position, with the majority of active funds and first investments.
Foreign funds made 178 investments, or 52 percent of first investments last year, compared to 221 investments (58 percent) in 2014. Israeli VC funds made 166 investments, compared to 157 in 2014, seeing the Israeli funds’ share climb from 42 percent to 48 percent in 2015, despite locals making up only 31 percent of the number of active VC funds, or the funds that made at least one first investment last year.
The gaps between Israeli and foreign VCs is perhaps best explained by the average number of first investments made by each fund. In 2015, foreign VC funds made an average of 1.6 first investments per fund, while Israeli funds made twice as many investments, with 3.2 first investments per fund on average.
Koby Simana, CEO of IVC Research Center, observed another difference between Israeli and foreign VCs: “Our analysis of the data shows a significant difference in first investment patterns between foreign and Israeli funds.
Traditionally, more than 80 percent of first investments by Israeli funds are made in the early stages of a company’s life – startup seed and R&D – while foreign funds activity is a little more evenly balanced between various stages, from seed and growth to late stages.”
The report writers say that the foreign VC funds that continue to rank at the top of the Most Active Funds list year after year are mostly funds that have a strong Israeli presence with a local branch, capital allocation to Israel or Israeli partners and team members who drive their continued focus on Israel.
The 2015 Most Active Funds ranking includes several such funds, with Innovation Endeavors, Marker and Blumberg, all having a strong local presence, as well as OrbiMed Israel, an Israeli VC fund founded by American investors OrbiMed Advisors to spearhead their Israeli investments.
The report also suggested the micro VC funds phenomenon seems to be losing steam after soaring in 2011 and climbing steadily through 2014.
The top micro VC fund made only seven first investments in 2015 compared with 12 first investments made by the top fund in the larger fund’s ranking, or 11 first investments made by 2014’s Most Active Micro VC Fund, Titanium Investments.
“There is a clear correlation between the funds’ ranking at the top of the Most Active Funds table and the funds’ vintage year, “says Rotem Inbar, the researcher responsible for the report, at IVC Research Center. “In general, the older the fund, the less available capital it has for first investments.
Most top-ranked funds belong to the 2014 or 2015 vintage, but in the past two years we have seen fewer micro VC funds raising new capital, which is why the 2015 ranking include relatively older micro VCs, such as lool (2011) or Peregeine (2006).
In fact, a number of the latest vintage funds are second or third funds raised by former micro VC management companies that have taken advantage of the VC capital raising momentum and scaled up to larger funds. These include this year’s Most Active Fund Singulariteam II, a $102 million fund closed in 2014, which followed a first time smaller fund closed in 2012. ”
Some of the micro funds ranked share a characteristic also observed at First Time Fund, their founding teams come from other earlier stage investment entities such as a technological incubators, a startup accelerator or an angels’ club. Such fund, namely OurCrowd, InovGate, Peregrine, Elevator, as well as others, are formed as a follow on investment mechanism by those teams, allowing them to keep backing portfolio companies after graduation or into following early rounds.
Yonatan Altman, a chairman at law firm APM & Co., concluded: “The venture capital industry is reclaiming its position and place as the main engine driving the Israeli high-tech industry. 2015 witnessed the formation of new venture funds, sequel funds, technological incubators and alternative investment vehicles with significant assets under management. We are optimistic as we face 2016, given the funnel of Israeli funds under formation as well as the number of international investors continuously diverting capital to Israel.”