Opinion
AI is rewriting the exit playbook for founders
For decades, Israeli founders chased Nasdaq. In the AI era, that strategy may no longer be optimal.
AI is no longer just an opportunity - it’s a wake-up call. In recent months, several top-performing Israeli tech companies have seen their share prices drop sharply within days as new AI solutions emerge, forcing founders to rethink whether waiting for an IPO is still the smartest move.
For decades, the default ambition of high-growth Israeli tech companies was clear: build, scale, and ring the bell on Nasdaq. IPO was not just a liquidity event - it was validation. It signaled durability, independence, and global relevance. But the AI era is quietly rewriting that script. Accelerated technological cycles, AI-driven entrants, and hyper-reactive public markets are changing the calculus for founders. Increasingly, the share prices of publicly traded companies have fallen sharply when new AI solutions promise capabilities similar to their own. Recent trading patterns among global SaaS companies - including Israeli-founded companies - illustrate this: even companies executing well operationally have seen dramatic repricing, showing how quickly value can erode in public markets.
Historically, Israeli tech companies built defensible moats around proprietary technology, deep domain expertise, and customer integration, which provided time - often years - to scale before facing competition. AI is shortening those cycles. Large language models, open-source frameworks, and hyperscaler infrastructure allow competitors to replicate product features in months rather than years. Distribution and data still matter, but feature-based differentiation is increasingly fragile. In practice, the window between breakout growth and commoditization is narrower than ever. Waiting for the “perfect” IPO moment may increase risk rather than reward. Public investors prize predictability, but revenue, margin durability, and customer retention are now under intense scrutiny. Even strong companies struggle to articulate a multi-year forward narrative, and markets often price that uncertainty aggressively. Strategic buyers, in contrast, often see opportunity where public markets see risk, valuing potential and optionality over near-term predictability.
The bar for a successful IPO has moved. Companies are now expected not only to demonstrate growth, but scale, profitability or a credible path, and operational resilience. For many Israeli companies, the question is no longer “Can we go public?” but “Should we?” IPOs impose governance changes, quarterly reporting pressures, and strategic rigidity that can feel heavy in a fast-moving AI environment. By contrast, M&A offers founders the ability to crystallize value while retaining influence within a larger platform, leveraging global resources, and capturing upside from AI-driven growth. Structured deals - including earn-outs and minority recapitalizations - allow nuanced outcomes that preserve optionality and can be executed more quickly than a public listing.
In a market where technological timelines are compressing, timing is as important as scale. Many founders are choosing to take money off the table earlier, protecting against market volatility and rapid replication of their innovations. The IPO dream still exists, but in the AI era, the smartest founders ask not just “How long can we wait?” but “When does the certainty and strategic leverage of an M&A exit outweigh the risks of waiting for an IPO?” For Israeli tech companies, that recalibration could reshape the local exit landscape for years to come.
The writer is Head of M&A at Willis (WTW) Israel.
