2018: Israel’s most active VC funds are Vertex, TLV Partners with 11 new investments

Investments include Israeli high-tech companies only. Excluding investments by VC funds in companies from incubators or accelerators owned by these funds.

Key facts:
• In 2018, VC funds first investment activity in Israel was robust following previous years’ trend, but was down from 2017 record
• Israeli and foreign VCs maintained a traditional share of first investments —Israeli funds held 39% while foreign VCs held 61%
• Mid-stage companies attracted largest share of first investments in 5 years—35% of total number; early stage was the lowest since 2014— down 17% from 2017
• Lowest number of first investments in seed rounds since 2014, mostly due to a decrease in foreign VC investments
• Rounds were preferable for first investments among VC funds, taking 38% share

 

VC Research rating the most active venture capital funds in Israel in 2018. Vertex Israel, which manages $960 million, and TLV Partners, which manages $267 million, are rated the most active in Israel, with 11 new investments each in 2018.

Vertex also ranked first in 2017, with 12 first investments. TLV Partners, which was founded in 2015 by managing partners Rona Segev and Eitan Bek, former Pitango Venture Capital general partners, appears on the list for the first time. Both firms deployed capital from two active funds, Vertex IV and TLV I from vintage year 2016 and Vertex V and TLV II from 2018.

The VC Research in cooperation with the Amit, Pollak, Matalon & Co. law firm, found the high rating for 2018 is a result of the timing of these financing rounds, which usually produce many investments after the funds are raised.

Three VC funds ranked second with 9 first investments each: CE Ventures from Hong Kong, which has been active in Israel since 2015; Israeli venture capital fund Next Gear, which invests in mobility companies in the early stages, and MizMaa, another fund located in Hong Kong. The prevalence of Chinese funds in Israel has increased in recent years, mainly in later-stage ventures.

Four funds joint third on the list with eight first investments each. Three of them Israeli : veteran Pitango, Brazilian venture capital fund ROI Ventures, Tel Aviv University micro-fund TAU, and Upwest Labs, another Israeli micro-fund. Of the nine funds in the first three places on the list, six are Israeli, two are from Hong Kong, and one is from Brazil.

According to IVC’s data, in 2018, venture capital funds slowed their first investment activity (503 investments) compared to the 2017 record (553 investments). Israeli funds first investments decreased 17%, following an active 2017, which marked a five-year record. Foreign VC first investment activity has been decreasing since 2015, with a minor decline of 4% in 2018. In keeping with the trend of the past few years, in 2018 foreign VC funds maintained their share of about 60% of total first investments and Israeli funds captured almost 40%.

Venture capital funds slowed their activity in 2018, making 503 first investments in companies, compared with 533 in 2017, according to IVC’s figures. The number of first investments made by Israeli venture capital funds dropped by 17% in comparison with the five-year high posted in 2017. The number of first investments made by foreign venture capital funds has been declining since 2015, and fell by a further 4% in 2018. The foreign venture capital funds maintained their share of the market, accounting for 60% of all first investments in 2018, compared with 40% by Israeli funds, the same proportion as in recent years.

The total number of investments by active funds has also declined in recent years. The most investments by a fund this year was 11, compared with 17 in 2013. The top-rated fund in 2015 was Samurai Incubate, a specialist Japanese fund for investments in companies in the early stages, which made 15 first investments. Samurai Incubate was the only non-Israeli fund to lead the list in the past five years.

356 new seed-stage investments, 33% of all investments, were made in 2018, the lowest number since 2014. According to IVC, first investments in seed-stage companies by foreign funds totaled 77 in 2018, lower than the 90-113 range prevailing in the preceding four years. In 2018, venture capital funds preferred investing in A rounds, which accounted for 38% of all first investments.

Together with the decline in investments in the early stages, IVC recorded a 5% rise in the number of first investments in companies in the intermediate stages (annual sales of up to $10 million), which accounted for 35% of all new investments in 2018.

According to APM & Co. Chairman, Adv. Yonatan Altman: “2019, similarly to 2018, will be characterized by the continued shift of investments from tradable to non-tradable assets. Along with the development of the market, it is evident that investment areas, as well as groups of managers, become more diverse and distinct. Venture capital and private equity funds continue to be formed both as specialized funds and as general funds. There are plenty of well-run funds for any investment stage.” According to Altman, high-tech activities penetrate all industries, including the traditional ones, and offer different opportunities to all.

Altman points out that: “The financing funds are also undergoing an accelerated process of development and diversification. Innovative financing instruments, alongside old financing funds, are currently being established, among other things, due to the need to increase the non-bank financing component. The worlds of real estate and infrastructure in Israel and abroad are also producing activities that are growing, both in traditional and less traditional areas. The point of convergence between financial resources and management is the combustion engine of the funds industries in Israel and abroad. Consequently, we believe that 2019, which has already started by storm, will be a good year for the industry, investors, and managers.”

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