Tough times in the Wadi

January 24, 2009 by Lisa Damast
Filed under: Industry pulse, Information Technology, Israeli Websites, Uncategorized, VC

Though 2008 was clearly a tough year for companies and venture capital funds in Israel and worldwide, several announcements this week have given a better picture of the extent of its impact on Israel’s Silicon Wadi.

Globes reported this past week that Aviv Venture Capital raised $52 million for its Aviv II Fund last month but had originally set out to raise $100 million. It was also announced that social search technology startup, Delver, will be ceasing its operations in the next 30 days unless it raises necessary funds or gets sold.

In addition to these, research on venture capital funding in the fourth quarter of 2008 from the Israel Venture Capital Research Center shows how the global recession affected fundraising in Israel overall. According to a Jerusalem Post article on the research, in the fourth quarter, 109 Israeli hi-tech companies raised $394m. which was 34% below the $600m. raised in the previous quarter and 22% below the $503m. raised in the fourth quarter of 2007.

It’s not just on the funding side. Nortel’s recent bankruptcy filing has raised questions about what toll it will have on Israeli companies that were financially intertwined with it through business contracts and partnerships. Israeli companies expected to take a hit include AudioCodes and TTI and possibly Radvision and Alveron.

Things might continue to be gloomy and hard in 2009, but it won’t be the end of innovation and entrepreneurship in Israel. The layoffs that have been a result of the economic crisis are producing a new crop of entrepreneurs and startups that will have better skills to succeed in the long term using less money should they survive the downturn.

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