Israeli high-tech: $1.61 billion in 2Q/2018
The amount raised in the quarter brings funds raised by Israeli high-tech companies in the first half of the year to an all-time record of $3.2 billion — higher than the annual total capital raised in the full years between 2010 and 2013. Excluding the Landa financing round, the overall amount raised in the first half of 2018 is still the highest since the beginning of the decade.
In the second quarter, early stage companies (or A rounds companies) raised $200 million in 39 deals. Medium range rounds (B and C) attracted $857 million in 47 deals, accounting for 53% percent of the total capital raised.
“The trend of growth in investments in Israeli high-tech continues to stand out,” said Shmulik Zysman, a managing partner at Zysman, Aharoni, Gayer & Co. (ZAG-S&W), in a statement. “With the exception of the Q2/2016, this quarter represents the most successful quarter in the last six years. We are also seeing an increase in capital raised from foreign investors. In our opinion, this growth is also due to an increase in investments from China, as well as from European investors who are interested, among other things, in automotive technology.”
If the capital-raising activity continues at the same levels, 2018 is forecast to end as a good year for early stage capital raising, after companies at this stage of growth suffered from a decline in investments in 2017. There were 186 earl- stage financing deals, seed and A rounds, by the end of the first half of 2018, indicating that the trend may be changing for the better for firms of this stage, IVC said in a statement.
The number of investors involved in these deals has also grown. “Since 2012, the number of investors involved in the Israeli high-tech market has grown exponentially, reaching a peak in 2017,” said Marianna Shapira, research director at IVC, which tracks the Israeli tech industry. In the first half of 2018 the number of investors has already reached 60% of the 2017 peak, she said.
IVC data shows that 65% of the investors in the first half of 2018 were VC funds and corporate investors, with the number of investment companies also increasing their activity locally over the past four years.
“Lately, we have seen a wider variety of investors actively taking part in the Israeli high-tech industry, enlarging their portfolios with innovative Israeli companies. Israeli startups have never enjoyed such a vibrant and diverse investor community as it is right now,” Shapira said.
Software firms lead the pack
Software companies raised the most money in the quarter, attracting $584 million in 65 transactions, 36% of the total capital raised in the quarter. Life science companies have also been attracting a lot of investor attention, IVC said. In the second quarter of the year life science deals amounted to $267 million in 39 deals, slightly lower than the amounts these companies raised in the previous quarter and in the same quarter a year ago.
Looking at the industry verticals, artificial intelligence (AI) companies were one of the leading industry verticals in the quarter, with companies raising $426 million in 45 deals. Cybersecurity capital raising remained high, with 30 deals accounting for $394 million, mostly for mid-sized (series B) companies.
Funding for both Internet of Things (IoT) companies and fintech companies slowed down in the second quarter, with companies raising $214 million and $150 million respectively, after a strong first quarter, IVC said.
Shoshanna Solomon