Investments in Israeli fintech (financial tech) firms soared to a record $2.3 billion in the first half of 2021, representing a record-breaking 260 percent increase over funding in the first half of 2020. It also surpassed 2020’s full-year total of $1.8 billion by 28 percent. These fintech investments made up 19 percent of the $12.2 billion invested in Israeli tech companies in the first half of 2021, according to a newly published report by Start-Up Nation Central (SNC.)
Israel’s fintech sector has already had 68 funding rounds in the first half of 2021, nearing the 74 total funding rounds which made up the entire last year.
The report displayed a breakdown according to round type, which showed an increase in both the number of seed rounds and also in the number of rounds for Series C and above. “This indicates that while fintech is a mature sector, new startups are continuing to emerge,” SNC said in a statement.
There were 26 seed rounds in the first half of 2021, compared to 18 in all of 2020 and 15 C+ rounds in the first half of 2021, compared to just 13 in all of 2020.
Seven companies have raised investments of more than $100 million in the first half of 2021, compared to only five in all of 2020.
Israeli-founded global fintech-as-a-service provider Rapyd raised $300 million in a Series D in January 2021, while eCommerce fraud prevention firm Forter raised $300 million at a $3 billion valuation in a Series F round in May. Also, supplier payment platform Melio raised $110 million at a $1.3 billion valuation in a Series D round in January 2021.
The last two years saw 70 percent of Israeli fintech funding funneled into three subsectors which included payments, anti-fraud, and insurtech. The report shows that the trend has continued in 2021, with payments in the top spot comprising 35 percent of fintech funding in the first half of 2021, as the demand for online payments skyrocketed with COVID-19 restrictions.
The first half of 2021 also saw investment growth in enterprise solutions, according to the report. This new demand was “largely spurred by the pandemic-induced rush for corporate innovation which created an opportunity to modernize legacy processes,” SNC said.
The first half of this year also had seven acquisitions, one IPO, and one completed SPAC, compared to eight acquisitions and one IPO in all of 2020. SNC said the rise in exits can be linked to the US Federal Reserve’s monetary policies, which promoted cash influx to financial markets. This lead to a surge in public capital market activity.
The year 2021 has been “encouraging” for the Israeli fintech sector “so far” with a record number of large late-stage funding rounds, notable exits, and emerging early-stage companies,” said Nicole Krieger, Start-Up Nation Central Fintech Analyst.
“COVID-19 drivers aside, Israeli fintech companies have grown rapidly and globally, building commercial partnerships and contributing significant technology to payments and enterprises. Tech innovation significantly upgraded legacy financial services processes. The sector now stands poised for a new era, we see a digital age emerging and are watching digital currency evolution enter a new digital age, it seems the stage could be set for subsequent FinTech evolution such as the adoption of digital currencies,” she added.