2019: The most active year for venture capital in Israel's history

  • #Israeli High tech
  • #Deals
  • #Investments
  • #Tech Companies

Article publié par Zacharie Lahmi, Lead Analyst AI chez Keyrus Innovation Factory

According to a report published by IVC Research Center in collaboration with Zag- S&W International law firm, Israeli tech companies raised $1.55 billion in the first quarter of 2019.

Last year, $6.47 billion was raised in 623 deals, a 17% increase from 2017 and the highest ever annual figure. We observed last year fewer early-stage deals in amount of deals, compensated by the uptrend of larger deals seen since 2016.  

2018 was also a unique year with 5 deals over $100m+. This trend seems to continue, as Innoviz ($132m) & Drivenet ($110m) deals indicate. These two deals alone captured 16% of the total amount of capital raised.

Each year, the first quarter is the least active in the overall number of deals, and the figures are rising compared to previous years. Yet, this quarter’s total deal number fell by 25% compared to Q4 2018, mostly due to a decrease in seed and series A rounds.

The gap between mature and early-stage companies funding was wider than ever in 2018. Analyzing this quarter data, we expect this gap to be even bigger this year.

This significant change traduces a shift in the high-tech industry and investors’ appetites. Since 2016, they tend to allocate more resources to less risky ventures with moderate returns. In Israeli High-tech, seeds and Series A traditionally accounted for the majority of deals.  

In this first quarter, deals higher than $20m were responsible for 64% of the total amount invested.  So far, C rounds attracted the most capital of all rounds, $476 million in total. Last year, the megadeal trend was at its peak and this quarter data indicates that 2019 will reach even higher heights.

The median dollar amount of early rounds is steady, while mid and late rounds continued their uptrend seen since 2016. The major increase was in deals between $5 million and $20 million, accounting for 40% of the number of deals this quarter.

The effect of bigger deals is seen also on companies’ valuations, especially in the sectors attracting the largest capital: software and life sciences. Since mid-2017, the valuation of deals has almost doubled in the software sector.

On a technological side, Artificial Intelligence deals continue to grow with large deals such as Augury System ($25m) and Gong.io ($40m). The report highlights the ubiquity of AI, making it the relevant technology for big funding rounds in many verticals, including Fintech, CyberSecurity or Automotive.

The number of Seed and A Round investments is highly correlated with the growth of AI companies, suggesting that young AI companies in Israel are still rooting investor interest.

Our Research team expects 2019 to be the most active year in Israel Venture Capital history.