Published On: Wed, May 1st, 2019

2019 is shaping up to be an incredible year for Israel’s tech scene

Only four months ago when the stock market tanked, it seemed like we are heading up for a very tough year. However, so far, it’s been a phenomenal year for Israeli startups– one of the best starts to a year I can remember. As we enter Passover holiday for 2019, it’s good to acknowledge what’s going well.

Here are some of the top trends we have witnessed this year:

Mega acquisitions:

Intel’s acquisition of Mobileye two years ago for $15.3 billion set a new bar for how high Israeli companies can aim. This year, NVDIA buying Mellanox, the connectivity chipmaker, for $6.9 billion, reaffirmed that Israel still holds the potential to grow additional companies to the same scale as Check Point, now worth $20 billion.

These mega exits paired together with an emerging crop of newer publicly traded Israeli companies finally debunks the myth that Israel is only for early stage startups. Wix, worth $6.2 billion, and CyberArk, worth $4.5 billion, are not just leaders in the Israeli tech scene, but across the globe.

New set of buyers:

We’re seeing a new set of non-traditional buyers eyeing Israeli technology and looking to benefit from the local ecosystem in the same way that most of the tech giants have done in the past. Forget Microsoft, Google and Intel- say hi to Coca-Cola, Disney, and Costco.

I believe McDonald’s acquisition of the personalization startup Dynamic Yield for $300 million last month is going to be a first in other similar type of non-traditional acquirers. Just a few weeks ago, Walmart CEO Doug McMillion visited Israel searching for interesting startups. The emergence of new buyers in Israel opens doors to potential collaborations and acquisitions for Israeli companies.

Cyber is heating up:

The Israeli cybersecurity industry has long been recognized as a major source for innovation. However, until recently, many Israeli cybersecurity startups have focused on building a solid product, and then, quickly sold the company to one of the larger cyber incumbents.

This trend has changed over the past few years with many Israeli cybersecurity startups aiming to become category leaders. It was ratified this year as we saw Israeli cyber companies raising larger amounts, including container-security company Aqua which raised a $62 million round and internet of things security company Armis, which raised $65 million. We have also already witnessed pretty nice cybersecurity exits this year with Palo Alto Network’s acquisition of Demisto for $560 million and Symantec’s acquisition of Luminate for $225 million.

IPOs are back:

After a long drought in Israeli startups going public, cyber security company Tufin went public this month and is trading at about $600M market cap. But this is only the first of many Israeli startups poised to go public, assuming macro conditions remain stable. Companies such as Fiverr, Zerto, and Payoneer are all rumored to be eyeing an IPO.

Slew of acquisitions across sectors:

Since the beginning of the year we have seen a large number of Israeli startups getting acquired across a wide range of sectors: Infrastructure companies Alooma (acquired by Google for $150 million) and CloudEndure ($200 million acquisition by Amazon), cybersecurity startups Demisto (acquired by Palo alto Networks for $560 million) and Luminate (acquired by Symantec for $225 million), SaaS startup Samanage ($350 million acquisition by SolarWinds) and Dynamic Yield (acquired by McDonalds for $300M), Video creator Magisto (acquired by Vimeo for $200M), and semiconductor company Corephotonics (acquired by Samsung for $150 million) were all acquired in the past few months.

Mega funding rounds

This upsurge in activity goes hand in hand with a large increase in funding for Israeli startups. Only last week, AI-insurance startup Lemonade announced a $300 million funding round which brings its total funding to $480 million. These enormous rounds were unimaginable for Israeli startups just a few years ago. While not all these companies will succeed, this virtuous cycle should lead to more mega exits and larger public companies coming out of Israel, which will improve the pool of talent and further increase funding.

Yes, it’s true that the market will have to cool down at some point. But there is one thing which is already clear–what used to be startup nation is rapidly progressing towards becoming scale up nation. In fact, there’s never been a better time to be a founder in Israel.

Amit Karp is Editor of Bessemer Venture Partners and Venturing startup nation

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