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  • 1. THE IVC-KPMG SURVEY Summary of Israeli Venture Capital Investments Q3 2013 Marianna Shapira, Research Manager, IVCOctober 2013

2. IVC-KPMG SurveySummary of Israeli Venture Capital Investments Q3/2013 Table of Contents Methodology ........................................................................................................ 3 About the Authors............................................................................................... 3 Summary of Israeli Venture Capital Investments Q3/2013 ......................... 4 Chart 1: Distribution of Israeli Venture Capital Investments by Type of Investor Q1/2011 Q3/2013 ($m) ......................................................................................... 4 Israeli VC-Backed Transactions .................................................................................. 5 Chart 2: Israeli VC-Backed Deals Q1/2011 Q3/2013 ($m) .................................. 5 Israeli VC Fund Investment Activity ........................................................................... 6 Chart 3: Distribution of First and Follow-on Israeli VC Fund Investments (%) ..... 6 Investment Rounds Excluding Israeli VC Fund Participation ..................................... 7 Chart 4: Israeli VC Funds vs. Other Investors (%) Q1-Q3/2012 vs. Q1-Q3/2013 .. 7Capital Raised by Sector .................................................................................... 8 Chart 5: Capital Raised by Israeli Internet Companies ($m) ................................... 8 Chart 6: Share of Capital Raised by Israeli High-Tech Companies by Sector Q1/2011 Q3/2013 ................................................................................................. 9Capital Raised by Stage .................................................................................... 11 Chart 7: Share of Capital Raised by Israeli High-Tech Companies by Stage Q1/2011 Q3/2013 ............................................................................................... 11Legal Disclaimer and Copyright...................................................................... 13-2-IVC Research Center Ltd. 99 HaHashmonaim St., 2nd Floor, Tel Aviv 67133, Israel www.ivc-online.com Tel. +972-73-212-2333 Fax. +972-73-212-2323 E-mail: info@ivc-online.com 3. IVC-KPMG SurveySummary of Israeli Venture Capital Investments Q3/2013 Methodology This Survey reviews capital raised by Israeli high-tech companies from Israeli and foreign venture capital funds as well as other investors, such as investment companies, corporate investors, incubators and angels. The Survey is based on reports from 129 investors of which 34 were Israeli VC management companies and 95 were other entities. The survey covers total investments in the Israeli venture capital sector, including both VC-backed rounds where at least one investor participating in the round is a VC fund as well as deals not backed by venture capital funds. For more on our methodology please click here. For additional information, please visit: www.ivc-online.com Marianna Shapira, Research Manager, IVC +972-73-212-2339 marianna@ivc-online.com *** About the Authors IVC Research Center isIsraels leading research center providing business leaders with an unmatched wealth of data on Israel's high-tech, venture capital and private equity industries. IVC products and services are used regularly by high-tech companies, venture capital funds, private investors, financial investors and institutions, as well as public entities such as the Central Bureau of Statistics, the Bank of Israel and the Office of the Chief Scientist at the Economy Ministry. IVC owns and operates the IVC Online Database (www.ivc-online.com) containing over 10,000 Israeli high-tech companies, venture capital funds, investment companies, angels and technology incubators, as well as news updates and lots more. Among IVC products and publications are the IVC Quarterly Survey, which for over 15 years has been analyzing capital raising trends by Israeli high-tech companies, as well as the most comprehensive guide to Israeli high technology and venture capital the IVC High-Tech Yearbook. The 2014 edition will be published in April 2014. KPMG Somekh Chaikinstechnology professionals offer insights and experience accumulated from a long history of work with technology and life science companies. Through a global network of highly qualified professionals in Israel, the Americas, Europe, the Middle East, Africa and Asia-Pacific, KPMG helps clients address the opportunities and challenges driven by new business models such as cloud computing, mobile services and others. KPMG is a global network of professional firms providing Audit, Tax and Advisory services. KPMG operates in 146 countries and has 140,000 people working in member firms throughout the world.-3-IVC Research Center Ltd. 99 HaHashmonaim St., 2nd Floor, Tel Aviv 67133, Israel www.ivc-online.com Tel. +972-73-212-2333 Fax. +972-73-212-2323 E-mail: info@ivc-online.com 4. IVC-KPMG SurveySummary of Israeli Venture Capital Investments Q3/2013 Summary of Israeli Venture Capital Investments Q3/2013 In Q3/2013, 162 companies raised $660 million from local and foreign investors, the highest quarterly amount since 2000. This is an increase of 34 percent from $493 million raised by 143 companies in Q2/2013, and 35 percent from $488 million attracted by 143 companies in Q3/2012. (Chart 1) Chart 1: Distribution of Israeli Venture Capital Investments by Type of Investor Q1/2011 Q3/2013 ($m)Five companies attracted more than $20 million each, accounting for 25 percent of the total amount raised in Q3/2013. Nine companies attracted between $10 million and $20 million each, accounting for 16 percent of the total quarterly amount. Fifteen companies raised from $5 million to $10 million each and 70 companies attracted more than $1 million each. The average company financing round in Q3/2013 was $4.07 million, compared to $3.45 million in Q2/2013 and $3.41 million in Q3/2012. In the first three quarters of 2013, 474 Israeli high-tech companies raised $1.63 billion, a 12 percent increase from $1.45 billion attracted by 413 companies in Q1-Q3/2012, and 4 percent above $1.56 billion invested in 422 companies in Q1-Q3/2011. The average company financing round was $3.43 million, while average financing rounds in Q1-Q3/2012 and Q1-Q3/2011 were $3.51 million and $3.7 million, respectively.-4-IVC Research Center Ltd. 99 HaHashmonaim St., 2nd Floor, Tel Aviv 67133, Israel www.ivc-online.com Tel. +972-73-212-2333 Fax. +972-73-212-2323 E-mail: info@ivc-online.com 5. IVC-KPMG SurveySummary of Israeli Venture Capital Investments Q3/2013 Israeli VC-Backed Transactions One hundred and one VC-backed deals attracted $462 million or 70 percent of the total amount raised in Q3/2013. This compares to 86 deals totaling $399 million (81 percent) in Q2/2013 and 98 deals totaling $376 million (77 percent) in Q3/2012. Remaining capital raising rounds were completed by other investors foreign and Israeli without the participation of VC funds. (Chart 2) Chart 2: Israeli VC-Backed Deals Q1/2011 Q3/2013 ($m)The average financing round of VC-backed deals was $4.57 million, compared with $4.64 million in Q2/2013 and $3.84 million in Q3/2012. In Q1-Q3/2013, 288 VC-backed deals attracted $1.23 billion or 75 percent of the total invested, an increase of 21 percent from the $1.01 billion (70 percent) raised in 257 VCbacked deals in Q1-Q3/2012, but a three percent decrease from $1.27 million (81 percent) invested in 297 transactions in Q1-Q3/2011. The average financing round for VC-backed deals was $4.26 million in Q1-Q3/2013, compared with $3.95 million and $4.27 million in the corresponding periods in 2012 and 2011, respectively.-5-IVC Research Center Ltd. 99 HaHashmonaim St., 2nd Floor, Tel Aviv 67133, Israel www.ivc-online.com Tel. +972-73-212-2333 Fax. +972-73-212-2323 E-mail: info@ivc-online.com 6. IVC-KPMG SurveySummary of Israeli Venture Capital Investments Q3/2013 Israeli VC Fund Investment Activity In Q3/2013, $151 million was invested by Israeli VC funds, accounting for just 23 percent of total investments the lowest quarterly share in a decade. This compares with $123 million (25 percent) invested in Q2/2013 and $130 million (27 percent) invested in Q3/2012. Remaining investments came from foreign and other Israeli investors. First investments in Q3/2013 were $52 million (34 percent of total investments), a 49 percent increase from the $35 million (28 percent) of Q2, but 9 percent below the $57 million (44 percent) of Q3/2012. Follow-on investments by Israeli VC funds accounted for 66 percent. (Chart 3) Chart 3: Distribution of First and Follow-on Israeli VC Fund Investments (%)Q3/2013s average first investment was $2.74 million, while the average follow-on investment was $1.24 million. In Q1-Q3/2013, Israeli VC fund investments accounted for $418 million or 26 percent of the total amount invested. This compares with $388 million (27 percent) in Q1-Q3/2012 and $488 million (31 percent) in Q1-Q3/2011. First investments in Q1-Q3/2013 accounted for $145 million or 35 percent of total investments, compared with 34 percent and 26 percent in Q1-Q3/2012 and Q1-Q3/2011, respectively. Follow-on investments by Israeli VC funds made up the remaining 65 percent.-6-IVC Research Center Ltd. 99 HaHashmonaim St., 2nd Floor, Tel Aviv 67133, Israel www.ivc-online.com Tel. +972-73-212-2333 Fax. +972-73-212-2323 E-mail: info@ivc-online.com 7. IVC-KPMG SurveySummary of Israeli Venture Capital Investments Q3/2013 Investment Rounds Excluding Israeli VC Fund Participation In Q3/2013, venture capital deals without Israeli VC participation attracted $317 million, 48 percent of total investments. This compares with $189 million (38 percent) raised without involvement of Israeli VC funds in Q2/2013 and $176 million (36 percent) in Q3/2012. Eight corporate venture capital f