Israeli Venture Funds Raised Zero Dollars in 2010; The Situation is “Critical”

Wow, new data coming out of the IVC Research Center and KPMG may surprise those who haven’t been following the Israel’s celebrated tech industry. Evidently, not a dollar was committed to Israeli venture capital funds last year, a disaster even compared with 2009, when just $234 million was raised — $200 million of it by Sequoia Israel.

The IVC says the data correlates with fundraising in the U.S., though I’d say zero is meaningfully worse than the $12.3 billion that 157 U.S.-based venture capital funds raised last year. (The U.S. total represented the fourth consecutive year of declines and was the most sluggish year for VC fundraising since 2003. As it happens, 2003 was another year in which Israeli venture funds were unable to secure any new fundraising commitments.)

Unsurprisingly, IVC CEO Koby Simana said in a release that the situation is critical. With available capital at just $1.4 billion, “[the dearth of fresh capital] threatens the survival of numerous Israeli high-tech companies that cannot raise needed capital. Moreover, VC funds will not be able to finance new companies or, in some cases, support their existing portfolio companies.”

The IVC expects that Israeli venture firms will raise $800 million this year, thanks in part to government initiatives that encourage investment by Israeli institutional investors in local venture capital funds. But Simana warns that the impact of that influx won’t be felt until next year, “since local VC funds must first raise substantial amounts – 60 percent of the total capital of each fund – from foreign investors. It’s a real challenge for Israeli VC funds.”

VCs abroad are already major players in Israel. Last year they provided more than two-thirds of the $1.26 billion raised by Israeli tech companies in 2010, according to IVC data.

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