Notable Increase In Late-Stage Funding Allows More Israeli Firms To Grow, Forgo Sales, IPOs – Report
![Illustrative. Coins on a chart. Deposit Photos](https://nocamels.com/wp-content/uploads/2019/12/coins-1024x682.jpg)
A significant increase in later-stage funding is allowing more Israeli tech companies and startups to grow and expand without going down the road of acquisition or having to raise money on the public markets, according to Start-Up Nation Central (SNC), the Israeli non-profit organization that tracks Israel’s tech ecosystem.
In a new report published this month, SNC said the biggest trend in Israel’s tech industry in 2019 is firms raising money in growth stages. Late-stage funding this year climbed to $5.24 billion, up from $3.45 billion in 2018, according to the organization’s findings. This marks an increase of over 50 percent, coming on the heels of relative stagnation over the previous three years, wrote Meir Valdman, senior research analyst at SNC.
![Growth-stage funding rounds are on the rise, according to Start-Up Nation Central.](http://nocamels.com/wp-content/uploads/2019/12/SNCrounds-e1576500449702.jpg)
In 2019 alone, there were at least 15 rounds of $100 million or more raised by Israeli companies, compared to just four rounds in 2018, the report stated. Of these 15 rounds, six were for financial tech (fintech) companies including insurance tech firms Lemonade and Next insurance, which raised two of this year’s largest rounds – $300 million in Series E and $250 million in Series C, respectively. Another two large investments went to cybersecurity companies Cybereason ($200 million) and SentinelOne ($120 million). Three investments went into industrial technologies companies -Vayyar with $109 million, Innoviz with $132 million, and Fabric with $110 million). And another two for software applications companies, as well as one for media and telecommunications.
![](http://nocamels.com/wp-content/uploads/2019/12/15roundsblue.jpg)
Investors in these large rounds were dominated by foreign VCs, with General Catalyst participating in three of the 15 rounds, followed by Softbank, Bessemer Partners, Insight Partners and HarbourVest with two each. Israeli investors ClalTech, Vintage Investment Partners and Ion Crossover Partners also invested in two each.
The prevalence of foreign investors is a global trend, wrote Valdman. In 2019, there were some 442 VC-led rounds globally of $100m and over – the highest number ever – according to Pitchbook.
SEE ALSO: As Israeli Tech Ecosystem Matures, The Startup Nation Is Seeing Fewer New Startups
In Israel, there’s also a noted increase in later stage round size more generally. The median round size at later stages increased from $18.25 million in 2018 to $26 million in 2019 – an increase of over 40 percent, SNC said. Series C rounds and beyond saw an increase of 56 percent, from a median of $25 million in 2018 to $39 million this year.
This signals that startups based in Israel can raise substantial growth rounds (C and above) “and are not forced to sell or move locations after their B round or earlier as frequently occurred in the past,” according to the SNC report.
Significant growth rounds explain in part why the value of exits has declined in recent years “despite the continued boom in the sector.” M&As, wrote Valdman, “have declined from a peak of $7 billion in 2017 to $4.3 billion in 2019 as companies opt to raise more capital, grow and stay private rather than look to be bought.”
The IVC Research Center released a report this month noting that the increase in later-stage funding has contributed to a decline in newly established companies.
Sign up for our free weekly newsletter
Subscribe“The prolonging uptrend in Israeli high-tech capital raising boosted the local ecosystem with a steady stream of capital that flew mainly to mature and growing companies,” wrote IVC.
According to its findings, IVC said that in the first three quarters of 2019, only 83 seed deals were recorded, raising a total of $118 million. The number of deals lower than $1 million is sharply declining – from 394 deals in 2014 to 332 deals in 2018, and down to 158 deals under $1 million in Q1-Q3/2019.
![](http://nocamels.com/wp-content/uploads/2019/12/IVCdeclinestartups-1024x591.jpg)
This trend may slowly be “eroding early-stage startup activity,” IVC suggested, as the number of newly established companies is declining.
In 2018, only 707 new companies were formed, down from 1,383 in 2014, just four years prior. IVC did not yet disclose the figures for 2019 but said they were “low” and suggested that the Israeli high-tech industry “will witness a negative record in the number of newly established companies and their capital raising results.”
Exits fall
Early this year, PwC Israel released a report on the Israeli high-tech ecosystem scene, noting that, the number of high-tech exits – merger and acquisition deals and initial public offerings — declined sharply over the course of 2018, decreasing by 33 percent compared to 2017.
SEE ALSO: Capital Raised In 2018 By Israeli Companies Reaches Record Levels, But Exits Drop
In 2018, there were 61 exit deals accounting for a total of $4.9 billion (a figure that excludes high-profile but non-tech deals such as the acquisition of SodaStream, and Frutarom), compared to 70 for a value of $7.4 billion in 2017. The average deal size in 2018 was around $81 million, compared to $106 million in the previous year.
The report suggested that the decline in exits in 2018 is directly related to a more cautious and long-term approach whereby Israeli companies and entrepreneurs are halting their exit process in favor of a potentially greater, more profitable acquisition in the future. Some of the concerns involved also relate to the ongoing US-China trade feud, the relative instability of global markets and rising interest rates.
PwC Israel partner, head of advisory services, and transaction services leader Liat Enzel-Aviel was quoted as saying: “It appears that the decline in the number of high-tech deals is due to continued development by companies in the sector and growth possibilities that are postponing the sale of companies.”
Related posts
![](https://nocamels.com/wp-content/uploads/2024/09/lh6-350x204.jpg)
Marine Tech Keeps E-Foil Users In The Air And Out Of The Water
![](https://nocamels.com/wp-content/uploads/2024/06/pexels-tomfisk-1573885-350x197.jpg)
Clever Crop Tech Tackling Climate Change-Triggered Food Insecurity
![](https://nocamels.com/wp-content/uploads/2024/09/pexels-jonathanborba-128764943-350x233.jpg)
Facebook comments