Ernst and Young and VentureOne, a unit of DowJones Newswires, published their Quarterly Venture Capital Report for the US and Israeli venture capital industries last Friday. Although the fourth quarter of 2004 was fairly weak, the reports' figures reflect optimism.
After three consecutive years of decline, venture capital investment in the US rose in 2004. $20.4 billion was invested in 2,067 companies, compared with $18.9 billion invested in 2003.
The figures for Israel reflect a thriving industry $1.2 billion was invested in 179 companies in 2004. Although the number of investments in 2004 was the same as in 2003, the amount of capital raised was 25% higher. As in the US, 28% of investments were in early-stage companies, 25% more than in 2003.
Information technology was the leading field in terms of investment in 2004: $881.4 million was invested in 121 companies. Although the number of deals in 2004 was the same as in 2003, the amount of capital raised was 19% higher.
Israeli investors favored communications companies more than US investors. Both the number of investments and the amounts invested rose in 2004: $253.1 million, compared with $201.9 million in 2003.
In contrast to the US, venture capital investment in Israel was especially strong in the fourth quarter. Venture capital investment in Israel totaled $323.6 million in the fourth quarter, 50% more than in the corresponding quarter of 2003. The largest investment in the fourth quarter was $25 million in IXI Mobile, a provider of mobile communications software solutions.
Venture capital investment in the US totaled $4.5 billion in the fourth quarter of 2004, 8% less than in the preceding quarter, and 15% less than in the corresponding quarter of 2003.
There were 3% fewer investments in the fourth quarter than in the preceding quarter, and 17% fewer than in the corresponding quarter of 2003. The average investment was $7 million, thanks to a number of large deals during the year.
Published by Globes [online], Israel business news - www.globes.co.il - on January 24, 2005