Israeli startups soared to a whopping $25.4 billion in the first 11 months of 2021, representing a record-breaking 136 percent increase in funding compared to $10.8 billion in 2020, according to a new report published Monday from Start-Up Nation Central (SNC.)
The report also showed that Israel more than doubled its list of unicorns, adding 33 private companies valued at over $1 billion to its list this year. SNC said there are currently a total of 53 unicorns in Israel.
Funding for Israeli companies was 71 percent more than the global average and 78 percent more than the average in the US, according to comparative data compiled from PitchBook, the report said.
There were 74 mega-rounds (companies that raised more than $100 million) in 2021, compared to just 22 in 2020. This funding, which was $14.77 billion, made up more than half of the total capital raised this year, representing a whopping 310 percent growth from $3.6 billion last year.
Fintech, IT infrastructure, enterprise data, and security technologies were the sectors that raised the most capital this year. Referring to them as the “Big 3,” the report said that these three sectors made up 65 percent of the total funds raised this year and that each one doubled in 2021, compared to 2020. These sectors “emerged as the ‘Big 3’ of the Israeli ecosystem due to the fact that they are comprised primarily of pure software companies capable of delivering rapid solutions and are generally unaffected by distance from market,” according to the report.
“Two years into the COVID-19 pandemic, the Israeli tech ecosystem is stronger than ever. In a world in which digital has become the default, the Israeli tech ecosystem is a world-class source of solutions to global challenges. Israeli companies in the most sought-after areas, like finTech, and security technologies, have been able to supply their solutions to many more customers with a corresponding jump in valuations. The Israeli tech ecosystem is generally in excellent shape in terms of capital raised, foreign interest in our innovation, and the major buzz surrounding our ability to produce unicorns. This raises the question of whether Israel has made the transition from being the Start-Up Nation to the Scale-Up Nation,” said Avi Hasson, Start-Up Nation Central CEO.
Unicorns and IPOs
Similarly, Israel has become a unicorn nation. Companies that were unicorns represented many of the mega-rounds this year and as many as 15 of the 33 unicorns on the list this year held IPOs, with five of those IPOs worth over $10 billion, according to Globes. In 2020, 16 Israeli-founded companies became unicorns.
More than $11 billion went to what the report calls “Israel’s unicorn assembly line.” This is just a little under half of the total funding raised this year. Additionally, companies in the fintech, security technologies, and Enterprise IT and Data Infrastructure sectors make up the list of unicorns this year. The list is comprised of 11 fintech companies, 12 security tech firs, and 10 Enterprise IT and Data Infrastructure firms.
Unicorns that joined the list this year include Israeli-founded robotics firm Fabric; Israeli crowdsourced data community Lusha; Israeli-founded business management firm Honeybook; and transcription firm Verbit.
This year was a record-breaking one for IPOs and acquisitions. According to the SNC report, 57 companies went public this year, raising an accumulated $4 billion and nearly tripling the 22 IPOs that were completed in 2020 that raised $1.7 billion.
Sign up for our free weekly newsletterSubscribe
Israeli companies like cybersecurity firm SentinelOne, project management software Monday.com, game, and app developer IronSource, and digital adoption SaaS company WalkMe all completed IPOs this year.
Despite the hype this year, SNC reported only 10 SPAC mergers have closed, raising a total of $4.9 billion.
According to the report, the rise in the number of acquisitions has been modest — up to 119 from 91 in 2020 — the accumulated value of these buyouts nearly doubled from some $4 billion to $7.6 billion.
“One trend that stood out this year was the increase in the number of Israeli startups acquired by Israel-based companies,” SNC said in the report. There were 39 such deals carried out in 2021, the highest number on record, up from 21 in 2020. This is “another indication that the Israeli innovation ecosystem is maturing,” SNC said.
Foreign investors are increasing their investments in Israeli companies and are participating in many more rounds than in previous years, according to data from SNC.
Israel used to be a niche market for investors but trends over the last two years “show that it is now a go-to source for the biggest names in the industry,” SNC said in the report.
The report indicates that many of the world’s leading tech investment funds substantially increased the number of investments in Israeli companies.
Another trend that emerged over the past year is the strong presence of foreign VC funds, which currently make up seven of the top 20 most active funds and 4 of the top 10. This illustrates the level of attractiveness that Israeli companies hold for foreign investors and their growing influence on the market.
The report listed the most active investors in Israeli companies and a few of them were foreign investors. US firm Insight Partners was first, investing in 49 rounds in 2021, up from 17 in 2020. Entree Capital and Bessemer Venture Partners each invested in 23 rounds in 2021, up from 16 and 17 respectively. Tiger Global Management invested in 16 rounds in 2021, up from just 3 in 2020.