IVC and ZAG/Sullivan Summary of Israeli High-Tech Companies Capital Raising – 2019
08.01.2020 | ZAG/Sullivan Press Release
Concluding a Decade of Extensive Growth – $39.1 Billion Raised by Israeli High-Tech Companies; $8.3 Billion Raised in 522 Deals in 2019
Key findings 2010–2019:
- $39.1 billion raised by Israeli tech companies
- $12 billion raised in 128 Mega rounds (over $50m each)
- Average funding deal: $9.37 million
- $5.82 billion invested by Israeli VC Funds in the last decade
- Since 2010, the total amount raised per year grew 400%, the number of deals grew 64%
- VC-backed deals raised a record high amount of $6.4 billion in 2019 – the highest amount since 2010
Tel Aviv, Israel. Israeli high-tech companies raised $39.1 billion in 2010–2019. In 2019, Israeli tech companies raised $8.3 billion in 522 deals. Since 2010, capital raising by Israeli tech companies has grown by a whopping 400% and the number of deals by 64%.
The trend of the last years was apparent also in 2019, the total amount of capital grew much faster compared to the number of deals. The total amount raised by Israeli high-tech companies increased 30% compared to the 2018 amount of $6.35 billion. The number of deals declined from 2018’s 532 deals.
In Q4/2019, Israeli tech companies raised $2.29 billion. While the total amount raised in Q4 was the highest since 2012, the number of deals declined to 122.
Source: IVC-ZAG Tech Funding Report 2019
Adv. Shmulik Zysman, Founding Partner of ZAG/Sullivan, international law firm & head of the High-tech department in the firm, said: “2019 marked a record year, capping a decade of successive increases in capital invested in the Israeli high-tech industry. The final quarter of 2019, and the entire year of 2019, symbolize the clear and consistent trend of the Israeli high-tech industry: tremendous growth and frequent record breaking. This growth is partly due to the growing foreign capital invested in the Israeli high-tech industry. Israeli funds are also taking part, with total investments of these funds in 2019, more than 30% higher than in 2018. An interesting characteristic of the boost is the annual increase of tens of percent in capital raising in a wide range of fields, from software and the internet through life sciences to semiconductors. “Marking a decade of extensive growth, VC-backed deals raised a record amount of $6.4 billion in 2019 compared to $4.75 billion in 2018 and $1.13 billion in 2010. The number of deals with VC participation captured 60% of the total number of deals in 2019. The dollar volume of deals in which VCs took part captured 77% of the total raised in 2019.
At the same time, added Zysman, “the phenomenon of venture capital with less risk, which we pointed out last year and throughout this past year, has unfortunately turned from a warning sign into a real, alarming trend. In the past year, not only has the relative share out of total investment in early stage companies declined, but also the total capital invested in these companies has decreased.”
According to Zysman: “It’s easy to remain optimistic, however, when in the last year the total capital raised by the Israeli high-tech industry was more than 30% higher than in 2018. Another reason for optimism is that we have recently noticed many investors dedicated to investment in early stage companies. These are positive signs that we hope to see in the coming quarters.”
Capital Raising by Rounds
Seed is the only type of round that has shown a downward trajectory toward the end of the decade, in both amounts and number of deals: Seed round amounts shrank in 2019 to $148 million compared to $169 million in 2018.
The number of Series A deals jumped by 300% during 2010–2019, while the capital raised by them soared eight-fold compared to 2010.
In 2019, later rounds continued to attract large amounts of capital, raising $2.87 billion compared to $1.91 billion in 2018.
Capital Raising by Deal Size
Mega rounds (more than $50m) peaked in 2019 with 41 deals capturing 50% of the annual capital inflow. All companies that attracted more than $100m each—20 deals overall in 2019—were in growth stages, mostly in the software sector.
Mid-size deals ($10m–$50m) have also stood out. The number of smaller deals (up to $1m) shrank to 17% of the total number of deals in 2019, compared to 24% in 2010.
Guy Holzman, IVC CEO said: “More Israeli companies in the growth stage aim to become their market’s leader. The continual increase in the amounts invested in mature start-ups is due to new investors, such as Israeli and foreign Private Equity funds. Furthermore, IVC noticed a decline in the number of newly established companies. We believe that both trends will continue in 2020”.
Capital Raising by Sector and Selected Clusters
Artificial intelligence companies’ capital raising has skyrocketed over the past decade, reaching $3.7 billion in 199 deals in 2019. Eighteen deals, each over $50 million, accounted for 55% of the amount.
Cyber security tech companies raised $1.88 billion. Deal numbers retained 2018 levels. Fintech companies attracted $1.7 billion. The number of deals kept the five-year average.
The software sector continued to lead capital raising in 2019, reaching $4.4 billion in 2019, an increase of almost 50% compared to 2018. The increase was due to 26 deals, each over $50 million, that captured 58% of the total amount raised in the software sector. Life sciences companies raised $1.37 billion in 121 deals in 2019 compared to $1.17 in 102 deals in 2018.
Israeli Venture Capital Funds
Israeli VC funds’ share in the capital raising declined during the past decade to $1.1 billion in 2019, a 13.3% share of the total amount. The level of number of deals by Israeli VCs in 2019 remained in the mid-range for 2010–2019.
Predictions for 2020
Barring any dramatic changes in the macroeconomics conditions, the Israeli private market will continue to attract investors. Therefore, IVC estimates that the allocated capital for large and more established companies will continue to grow.
The number of first investments is expected to continue the slowdown. This trend, first recognized in 2018, expanded in 2019 and will not change course in the coming year.
AI and cyber-security tech companies will continue to be the most attractive for investors.
Several Israeli start-ups made IPOs in 2019, and the pre-IPO rounds in 2019 suggest that more companies will explore the IPO option in 2020.
This survey reviewed capital raised by Israeli high-tech companies from Israeli and foreign venture capital funds as well as other sources, such as investment companies, corporate investors, incubators, and angels. The survey is based on reports from 443 investors, of which 61 were Israeli VC funds and 382 were other entities. The term “early stage” refers to high-tech companies in the seed and R&D stages, not yet offering products to the market.
The survey covered the total capital raised throughout the Israeli high-tech sector, deals with participation of at least one VC fund, as well as deals not including venture capital funds. The survey includes amounts received by each company directly, including direct transactions performed between company shareholders. Many companies belong to more than one cluster, therefore the data regarding clusters should be viewed separately per cluster.
For additional information:
About the authors of this report:
IVC is the leading online provider of data and analysis on Israel’s high-tech & venture capital industries. Its information is used by key decision-makers, strategic and financial investors, government agencies, and academic and research institutions in Israel.
- IVC-Online Database (ivc-online.com) showcases over 8,800 Israeli technology startups, and includes information on private companies, investors, venture capital and private equity funds, angel groups, incubators, accelerators, investment firms, professional service providers, investments, financings, exits, acquisitions, founders, key executives, and multinational corporations.
- Publications include newsletters; Daily Alerts; the IVC Magazine; surveys; research papers and reports; and interactive dashboards.
- IVC Industry Analytics – analysis, research and insights into the status, main trends, and opportunities related to exits, investments, investors, sectors, and stages.
ZAG/Sullivan (Zysman, Aharoni, Gayer & Co.) is an international law firm with offices spanning Israel, the United States, China, and the United Kingdom. The firm’s multidisciplinary attorneys specialize in all aspects of commercial law for both publicly held and private companies. Mostly known for its expertise in the high-tech and life sciences arena, the firm is the focal point for its clients who are seeking capital and international transactions. ZAG/Sullivan provides results-driven legal and business advice to its clients, addressing all aspects of the clients’ business activities, including penetration into new markets in strategic locations. In recent years, the firm has acted on a majority of the equity and debt financing transactions by Israeli technology companies on the Nasdaq. It has been the firm’s experience that the best results, that give our clients the competitive advantage they need, are attained by coupling professional experience, global presence, and connections with the investor communities in Israel and abroad.