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Isreali Tech Companies Raised $39 Billion in Investments in the Last Decade, Report Says

Among the prominent trends of the last decade are increasingly large funding rounds, more late-stage investment, and a multitude of mega-rounds of over $50 million, according to a joint report by IVC and the Israel office of international law firm Zysman, Aharoni, Gayer & Co.

Hagar Ravet 13:1408.01.20
Israeli tech companies saw $39.062 billion in investments between 2010 and 2019, according to a joint report released Wednesday by Tel Aviv-based research firm IVC Research Center and the Israel office of international law firm Zysman, Aharoni, Gayer & Co. (ZAG-S&W). Among the prominent trends of the last decade are the increasingly high sums raised by local startups, more late-stage investment, and a multitude of mega-rounds of over $50 million. Since 2010, Israeli tech has seen accelerated growth with a 400% increase in the amount of funding raised and a 64% rise in the number of deals.

 

Over time, as the funding rounds grew larger, the growth in the number of deals was curbed. In 2019, for example, Israeli companies raised $8.29 billion over 522 deals compared to $6.35 billion raised in 2018 over 532 deals, according to the report. In the fourth quarter of 2019, Israeli startups raised $2.29 billion, the highest sum raised in a single quarter since 2012, and the number of deals went down to 122, compared to 168 year-over-year.

 

Tel Aviv. Photo: Yair Sagi Tel Aviv. Photo: Yair Sagi
 

Venture capital-backed investments reached a record of $6.4 billion in 2019, compared with $4.75 billion in 2018, and $1.13 billion in 2010, the data showed. Venture capital funds participated in 60% of all investments in 2019, investing 77% of the total sum raised.

 

The last decade saw 128 mega-deals of over $50 million each, amounting to a total of $12 billion, while an average deal for the decade stood at $9.37 million.

In the last year, late-stage companies continued to attract massive investments, amounting to $2.87 billion, compared to $1.91 billion in 2018. The amount of funding raised in seed rounds, however, shrunk from $169 million in 2018 to $149 million in 2019. The number of deals under $1 million dropped from 24% of all deals in 2010 to 17% in 2019, the data showed.

 

The three biggest investment deals of the decade—Lemonade Inc.’s $300 million round, Next Insurance Inc.’s $250 million round, and Cybereason Inc.’s $200 million round—were all made during the last year of the decade.

 

Megadeals broke yet another record in 2019, with 41 such deals, less than 8% of the year’s deals, raking in 50% of all funding raised.

These numbers suggest that venture capital investors prefer to play it safe, opting for investments in companies that already have a functioning product and proven sales. Should this trend continue in the long run, it could mean fewer new companies will emerge each year. One possible result could be that the Israeli government investment arm, the Israel Innovation Authority (IIA), which is currently the major source of funding for young local companies, would have to assume an even bigger role.

 

Israeli software companies raised $4.4 billion in 2019, almost 50% more than in the year before, according to the data. The increase was the product of 26 deals amounting to over $50 million each, attracting 58% of the total sum raised by software companies in 2019, according to the data.

 

Artificial intelligence companies raised $3.7 billion over 199 deals in 2019, with 18 mega-deals attracting 55% of the total funding. Also in 2019, cyber companies raised $1.8 billion and fintech companies raised $1.7 billion, according to the data. Life sciences companies raised $1.38 billion over 112 deals in 2019, compared to $1.17 billion in 2018.

 

Israeli venture capital firms’ respective role in investments shrunk over the past decade, reaching $1.1 billion, 13.3% of all investments, in 2019. This could be explained by the increasingly large sums being invested by foreign funds. It is also worth mentioning that most Israeli funds invest money originating from investors outside the country.

 

Barring dramatic changes to the country’s macroeconomic conditions, private companies will remain attractive for investors, but the number of first investments will continue to dwindle, the authors of the IVC-ZAG report wrote.

 

The authors also stated that the pre-initial public offering (IPO) rounds seen last year suggest more Israeli companies will attempt to go public in the coming year, hoping to follow in the footsteps of cybersecurity company Tufin Software Technologies Ltd., online gig marketplace Fiverr Int. Ltd., and aesthetic medicine company InMode Aesthetic Solutions Ltd.