The recent wave of Internet IPOs seems to remind the Israeli VCs of the previous tech bubble. 50% of them, believe that we’re about to enter a second bubble and 33% claim that Groupon, LinkedIn, Facebook, Twitter and Zynga are overvalued, according to the latest Israel VC Indicator Survey for Q2 2011, published by Deloitte.
Signs of gloom ahead
VCs in Israel are expressing growing pessimism with regards to the economic climate, as 40% predicted it will worsen in the next six months. This is a 10% decrease compared to the same quarter last year, and this magnitude of low expectations happened only prior to the 2008 credit crunch.
Continue after the jump…
But it’s not all so bad
That said, there’s also some cautious optimism. 15% of Israeli VCs believe that VC fundraising will become easier in the next six months, a 3% increase QoQ. There’s also a 30% in expectations for increased M&A activity, primarily in the Internet sector. Internet and new media are undoubtedly the hottest investment sector in Israeli high tech these days with 85% forecasting that this sector will drive the highest number of transactions in the next six months, but Medical Devices M&A expectation are also on the rise, with a 10% QoQ. Overall, 66% of VCs said that they believe an Israeli startup can become a major global Internet player in the next five years.
Other Highlights
- Shift to later stage investments becomes a scare
- Our survey shows that 31% of venture capitalists currently expect the majority of new investments to be made in Seed, reflecting a 16% QoQ drop
- 69% of Israeli VCs want the government to provider additional incentives for high tech companies
- 56% of VCs believe that Israeli fund sizes will increase
This is the 37th installment of the report, which identifies trends within the venture capital arena and tries understand the VC community’s sentiment for the next six to twelve months.
Follow this link to download the full PDF report.
I'm a former general partner at google ventures, head of Google for Entrepreneurs in Europe and founding head of Campus London, Google's first physical hub for startups.
I'm also the founder of Techbikers, a non-profit bringing together the startup ecosystem on cycling challenges in support of Room to Read. Since inception in 2012 we've built 11 schools and 50 libraries in the developing world.
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