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Monday, July 04, 2016

Israeli startups raise $1.4 billion in Q2, highlighted by $300 million Volkswagen investment in Gett

Israeli startups raised $1.4 billion in the second quarter of 2016, highlighted by a $300 million investment in Gett (a taxi app) by Volkswagen. But that's not the whole story. Most of the investments were much smaller, which means that early stage Israeli companies can still raise money.
The average amount raised per company in the second quarter was $27.9 million, or $12.1 million if the Gett investment is subtracted, $500,000 less than the average in the first quarter. This is more or less the amount of capital an earlier stage company already making initial revenue needs to keep going for 12-18 months. For the first half of the year, the average amount raised per company was $14.1 million, or $12.4 million excluding Gett.
13% of the companies raising money since the beginning of the year were biomedical companies, meaning companies developing drugs or medical equipment or a different medical solution. This means that the majority of available capital for investment is still going to technology companies, because their risk profile is naturally lower. The biomedical companies account for only 10% of the amount raised since the beginning of the year.
Three companies raised over $50 million in the second quarter, compared with four companies in the first quarter - almost the same, but only two compared with four if the Gett investment is excluded. This makes a total of seven companies since the beginning of the year - only 4.2% of all companies raising capital. This figure may indicate a slowdown in the number of potential unicorns - a company value of over $1 billion, which are often successful at raising this amount of money. Gett, which raised $300 million, and Via, which raised $100 million, may be valued in the hundreds of millions of dollars, but they are still far away from $1 billion - at least as of now.
The companies that raised over $50 million jointly accounted for 22% of the total raised in the second quarter and 29% of the amount raised in the first half of the year - in other words, 4% of the companies raised 29% of the total, showing that a very small number of companies receive a substantial proportion of the venture capital funds' investment budget.
86% of the companies raised up to $25 million in the second quarter, meaning that most of the companies that raised capital were just starting out (initial revenue). The proportion was the same for the first half of the year. These companies raised 45% of the total in the second quarter (47% in the first half), showing that there were many small companies and few large companies (although it is important to keep in mind that the bigger a company grows, the less it needs to raise capital, and the proportion of small companies is therefore greater).
And a reminder - again - that representing early stage companies and people investing in them is something I do for a living, so if you're  looking for investors or looking to invest, please drop me an email at IsraelMatzav@gmail.com.

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