Israeli high-tech firms in 2017 raised over $5.2 billion in venture capital funds from foreign and local investors with 620 recorded transactions and an average financing round of $8.5 million, according to a new report published this week by Israel Venture Capital (IVC) Research Center and Israeli-American law firm ZAG S&W. The report notes the figures mark an increase of 9 percent from 2016’s total of $4.83 billion, with 673 deals.
The amount raised from Israel-based venture capitalists also saw an increase, with Israeli VCs investing $814 million in 2017, an increase of 25 percent from $651 million in 2016. It was the highest recorded sum since 2013.
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Four Israeli companies – Cybereason, Via, Lemonade, and Skybox – raised over $100 million each in funding respective rounds, amounting to 12 percent of the total raised for the year, the study shows.
The most active period in 2017 was Q4 with Israeli companies raising a total of $1.44 billion in 159 deals, a 34 percent increase from same period in 2016.
The report noted that companies in mid- to late-stages attracted more capital – $3.9 billion of the total $5.24 billion – than firms in earlier stages, a pattern IVC says it first noted two years ago. Seed and early-stage companies raised $1.36 billion in 2017, a drop from 2016’s $1.43 billion, according to the study. The number of deals for seed-stage companies also decreased by 17 percent in 2017 compared with 2016.
IVC’s Research Director Marianna Shapira said in a statement that “investors poured more capital into fewer selected companies, providing portfolio companies the necessary means to mature.”
Managing Partner leading the high-tech sector at ZAg, Adv. Shmulik Zysman said, “In 2017, the capital raising volume increased, continuing the consistent growth trend of the past five years. The high-tech industry matures and settles as the source of innovation and interest for investors and entrepreneurs from all over the world.
Israeli software companies led all sectors in capital-raising, according to the survey, garnering $1.9 billion in 208 deals, as life sciences companies followed closely behind with $1.2 billion raised, an increase of 41 percent compared with the $850 million raised in the field in 2016. Semiconductor companies raised $348 million, a sharp increase from a year prior, with $124 million in funds raised. Communication companies, meanwhile, showed a decline in the amount raised and the number of deals, with $569 million invested in just 72 transactions. It marked a significant drop from the $872 million raised in 106 deals in 2016.
Initial Coin Offerings
The report also noted the uptick in Israeli companies going through Initial Coin Offerings (ICO), in which the firms raised money in return for in-house cryptocurrencies. Leading the pack was Sirin Labs, the Israeli-founded, Switzerland-based blockchain firm known for developing a $17,000 secure smartphone for high-end clients, which raised close to $158 million in December in a crowdsale for the SRN token. Sirin Labs’ new project — a blockchain-secured, open-source phone and PC called FINNEY. Bancor, an Israeli startup that developed a virtual currency conversion platform, raised $153 million in a matter of hours last June.
“From a financial perspective, a coin offering is not considered an investment, but has some characteristics of a financial asset,” the report says, adding that a similar pattern of blockchain-based companies seeking “capital and recognition” may emerge over the course of 2018, “or a change in the dynamics and a tremendous crash.”