Key facts:
- Eight new venture capital funds closed capital in 2016
- Four VC funds raised more than $100 million each, 62% of total capital
- 14 of 2016 vintage funds are expected to raise an additional $200 million in 2017
Israeli venture capital fundraising activity in 2016 reached $1.4 billion. 23 VC funds raising for the 2016 vintage year, including 12 first-time funds, IVC Research Center reports.
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Of the 2016 vintage funds, 14 made a first closing at an average 60 percent of their targets, and are expected to raise additional capital to be added to the 2016 vintage funds. It is expected that 2016 vintage fund raising will have totaled $1.6 billion, a record for the past decade, to surpass 2015 vintage year’s $1.5 billion raised by 19 funds.
A seventh Israeli VC fund raising cycle started in 2015, and has already reached 79 percent of the total amount raised in the sixth cycle, which took place from 2011 to 2014. Moreover, the amount raised by Israeli VC funds in the past three years remained high.
Koby Simana, CEO of IVC Research Center, says “VC funds managed to raise a considerable amount in 2016, surpassing expectations. This echoes the oversubscription reported by the VC industry in the US, which was arguably the strongest year ever in VC fund raising. More capital will be raised in 2017 for new and existing funds, so with all this capital available, we expect local VCs to shift their primary focus in 2017 to making new investments, which will hopefully have a positive impact on the local high-tech ecosystem.”
In 2016, four Israeli VC funds raised more than $100 million each. OrbiMed Israel Partners closed its second fund with $307 million. Vintage’s ninth fund raised $200 million, having closed its $125 million eighth fund just a year earlier, followed by Aleph’s second fund, with $180 million raised, after its first fund was closed in 2013. Last on the list was Red Dot Capital Partners, a first-time growth fund which raised $150 million and was closed in early 2016.
Growth funds drive the seventh fundraising cycle, with identical shares of 46 percent in both the 2015 and 2016 vintage years, although the number of players decreased – only four growth funds in the 2016 vintage year compared to nine new growth funds in 2015. The average 2016 vintage growth fund is thus the largest, at $157 million, and is expected to increase to as much as $164 million when targets are reached by the funds still raising further capital.
The micro VC fund trend also received a boost, doubling from seven funds in 2015 to 15 micro funds raised in 2016, accounting for 15 percent of total capital raised by VC funds in 2016, compared to a mere 10 percent in the 2015 vintage.
As 2017 begins, more than $3.5 billion is available for investment by Israeli venture capital funds. Of this amount, over $1.1 billion is earmarked for first investments, with the remainder reserved for follow-on investments. There are currently 49 VC funds that are still in the process of raising funds, 25 of which have made first closings. The other 24 VC funds have not made any investments yet, with half being brand new funds. With nearly $1 billion expected to be raised in 2017, we believe that as much as $0.5 billion will be available for first investments over the coming year.
