- 18 new venture capital funds closed capital in 2015
- Four VC funds raised more than $100 million each, 59 percent of total capital
- 72 percent of 2015 vintage funds are in first closing; expected to raise additional $500 million in 2016
Israeli venture capital fundraising activity was prolific in 2015, opening the seventh Israeli venture capital cycle with 18 new venture capital funds in the 2015 vintage year, IVC Research Center – KPMG Somekh Chaikin reports. So far, fund-raising efforts reached $1.02 billion in 2015, with 13 funds and 43% of the capital from funds at first closing, which are expected to raise an additional nearly $500 million, to be added to the 2015 vintage year, up from $1.2 billion in 2014.
IVC research manager Marianna Shapira said, “In the venture capital world, a vintage year is the year the fund starts investing after making a first closing, and in many cases, funds continue raising capital in the following year to reach their targets. 2015 is the first vintage year in the seventh VC capital raising cycle in Israel, which already looks promising with a number of new players entering the local VC market and 13 VC funds at first closing expected to continue capital raising efforts throughout 2016. We believe they will reach their target amounts, which will bring in an additional $500 million dedicated to Israeli investments for 2015 vintage funds. Furthermore, the 2016 vintage is already on its way, with seven VC funds currently engaged in a capital raising process, targeting more than $1 billion in total.”
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The seventh venture capital raising cycle that started early in 2015 – with 83 North’s $204 million closing announcement – followed a successful sixth cycle between 2011 and 2014, concluding with a total of $3.6 billion raised by 61 funds. The sixth cycle had been the strongest one since the early 2000s, ending with $1.2 billion for vintage 2014 funds, the strongest vintage year in the past decade. The sixth cycle’s most evident trend was the increase in the number of micro-venture capital funds, with 33 micro funds raising capital during this period, more than three times the number of such funds in the previous two cycles.
2015 vintage was marked by the emergence of six new growth funds, an outstanding number of funds dedicated to growth stage companies. While it may be a bit early to tell, it seems this might be a new trend for the seventh cycle. The average 2015 vintage fund currently stands at $57 million and may increase to as much as $82 million when targets are reached by the funds still raising further capital.
KPMG Somekh Chaikin Technology group partner Ofer Sela points to another interesting trend: “Over the past year we’ve seen a change in the LP mix in Israeli VC funds. While Israeli institutional investors have expanded their involvement then what it had been in the past, they still leave the arena mostly to investors from the US, and increasingly, from China. We can also see Israeli high net worth individuals going into VC investments. We hope this changing trend will get even more institutional investors involved in the industry, either as LPs in funds or co-investors in financing deals.”
In 2015, four seasoned Israeli venture capital funds raised a cumulative 59% of the total fund capital, with more than $100 million each. 83North stood out with its quick closing of $204 million, a third fund for the team, but the first under the 83North rebranding of Greylock Israel. Pontifax’s fourth fund attracted a noticeable $150 million, in addition to another $40 million at first closing for the management company’s AgTech fund. Pitango Growth, which is dedicated to growth stage companies, followed with a first closing of $125 million out of a targeted $250 million. Vintage’s eighth fund closed $125 million for late stage investments, after having closed its $144 million seventh fund only a year earlier, of which 50 percent are allocated to investments in Israeli funds.
Sela added, “The local VC industry’s viability is affirmed by two complementary trends. On the one hand we see veteran Israeli VC funds last longer than the average ten years, choosing to reinvest some of their returns, effectively increasing available capital. On the other hand, the VC funding cycles shorten as successful 2014 vintage VCs intend to start raising new funds during the last quarter of 2016, allowing them rapid cycles of first investments.”
At the beginning of 2016, over $2 billion is available for investments by Israeli venture capital funds. Of this amount, a little over $500 million is earmarked for first investments. The remainder is reserved for follow-on investments. With nearly $1 billion expected to be raised in 2016, IVC and KPMG believe that more than $700 million may be available for first investments over the coming year.
