The average funding round in 2016 reached a record $7.2 million while the number of deals closed last year slipped 7 percent to 659, according to the Israel Venture Capital Research Center and law firm ZAG.
In the fourth quarter, high-tech firms raised $1.02 billion.
Traditionally, many of Israel's tech companies have sold out at an early stage to global giants like Cisco, IBM and Microsoft.
But now start-ups are using a sharp rise in private investment to pursue growth, often aiming for eventual stock market flotations. With founders looking longer term rather than trying to make quick money, acquisitions of Israeli tech firms fell in 2016 to their lowest level in six years.
Koby Simana, CEO of IVC Research Center, said there was a 30 percent drop in the number of second rounds closed in 2016.
"This is a troubling trend for the Israeli VC funnel, since the majority of capital goes into later rounds – if there are no companies lined up for later investments, there could be a more serious issue later on," he said.
Shmulik Zysman, a partner at the ZAG-S&W firm, said the uptrend in capital raising is expected to continue in 2017, though possibly at slower rates.
(Reporting by Steven Scheer)
