Israeli startups raised a record $2.24 billion in 142 deals in the third quarter of 2019, according to a new report released this week by Israel-based IVC Research Center and international law firm Zysman, Aharoni, Gayer & Co. (ZAG-S&W).
While the amount raised in the third quarter was not far from the $2.32 billion raised in the second quarter of 2019, there were 14 more deals in Q3, compared to the previous quarter, which had 128 deals. That’s the highest amount of deals reported in a quarter since 2013.
There were also 23 more deals in Q3/2019 compared to the 119 deals of Q3/2018.
The amount raised in the third quarter of 2019 was up 37 percent from the $1.63 billion raised in the third quarter of 2018.
The report noted 13 deals over $50 million, which amounted to 57 percent of total capital raised in the third quarter of 2019. From the first quarter to the third quarter of 2019, there were a total of 23 deals that were over $50 million. In total, Israeli companies raised $3.26 billion in 63 deals from Q1 to Q3 of 2019.
The six largest deals in the third quarter totaled $841 million. Each startup raised $100 million or more. The startups include US-Israeli cybersecurity startup Cybereason, which raised $200 million in a later stage investment round; financial tech company Fundbox, which raised $176 million in a Series C round; video and image editing mobile app developer Lightricks, which raised $135 million in a Series C round; US-Israeli car loan startup Lendbuzz, which raised $130 million in a debt financing round; insurance tech startup Hippo Insurance, which raised $100 million in a Series D investment round; and retail analytics firm Trax, which raised $100 million in a later round.
Deals backed by venture capital firms raised $1.6 billion in 81 deals in the third quarter, the report said, up from the $1.31 billion in 72 deals raised in the third quarter of 2018. VC-backed deals raised $4.68 billion in the first quarter of 2019 to the third quarter, nearing the $4.76 billion raised by VC-backed deals in all of 2018.
Revenue growth companies led the raising of funds in the first three quarters of the year, with $2.58 billion in 48 deals, according to the report. This is a 65 percent increase in capital and a 23 percent increase in the number of deals from the annual figures of the previous year. The year 2018 was more favorable for companies at initial revenue stages, the report said.
“After seeing record-breaking numbers in the previous quarter, the third quarter even surpassed it, with this year’s recruitment record-breaking compared to every previous quarter. The record was recorded both for the Israeli funds whose total borrowing remains high and stable and for the total capital, which climbed by 45 percent in the corresponding quarter last year and last quarter,” said Adv. Shmulik Zysman, a managing partner & high-tech industry leader at Zysman, Aharoni, Gayer & Co. (ZAG-S&W).
“The data suggests that changing investor preferences may constitute a warning sign previously pointed out by us – ‘less risky venture capital.’, ” Zysman adds. “The proportion of total capital invested in early-stage companies relative to the total capital invested has been declining over the past year, with the lowest rate recorded this quarter. In contrast to the first three quarters of 2018, the total capital raising of early-stage companies in the first three quarters of 2019 has been relatively stable. Therefore, we have hope that this is not an unequivocal trend but only a warning sign.”