Medical devices help spur Israeli VC investment growth

Medical device venture investment is rising steadily in Israel, even as it continues its U.S. slump.

High-tech firms raised $493 million in the second quarter--a 4% rise from the previous quarter and a 3% increase over the same period in 2012. This was driven, in part, by healthy medical device industry growth, Reuters reports, based on a new roundup by the Israel Venture Capital Research Center and KPMG.

That growth comes as Israel's medical device companies continue to expand in number, hitting the 656 mark at mid-year with 35 now publicly traded. Israel also leads the world in medical device-related patents, the International Business Times reported in May. Additionally, the country's flourishing medical devices sector is drawing plenty of outside investment, venture capital or otherwise. Japanese consumer electronics giant Sony ($SNE), which is developing its medical devices business, sank $10 million into Rainbow Medical, an Israeli device incubator with portfolio companies focused on medical devices such as stents and stimulators. And there are many more outside investors looking for device companies or device-related technology programs in Israel in which to invest.

In fact, the overall high-tech investment for the quarter has a large international component. The quarterly roundup, done in conjunction with KPMG, found that Israeli VCs invested $118 million of the total high-tech VC in the quarter, a decline from $147 million in the first quarter and the lowest quarterly number in three years. Israeli VC share in capital invested is declining, but more than 60% of financing rounds included Israeli VC fund participation, the researchers noted.

Israel launched an initiative two years ago to promote life sciences investment, Reuters notes, though some see the effort as not bringing large enough gains to keep up with the U.S.

In contrast, U.S. venture capital investment in medical device companies declined slightly in the 2013 second-quarter, even as it soared for biotechnology and other industries. Investors devoted $543 million to 71 med tech deals during the quarter, a 1% decline in dollars and deals compared to the previous quarter, according to the National Venture Capital Association and PriceWaterhouseCoopers' quarterly MoneyTree report (based on Thomson Reuters data).

- read the Reuters story

Special Report: Top 10 Med Tech Investments of Q2