Published On: Wed, Dec 23rd, 2020

Israeli Tech Year 2020: Record-Breaking $9.9 Billion In Financing Rounds, a Decline in Exits

The Israeli tech raised $9.9 billion in 578 deals, an increase of 27% in the volume of capital and a 14% increase in the number of deals compared to 2019.

Key findings in 2020 Israeli Tech Review, published today by IVC and Meitar Law Offices.  

  • Israeli High-Tech companies raised $9.9 billion in 578 deals, an increase of 27% in the volume of capital and a 14% increase in the number of deals compared to 2019.
  • A record number of publicly-traded Israeli tech companies raised $6.55 billion by 121 companies compared to $1.95 billion by 68 companies in 2019.
  • A significant decline in M&As in deals under $5 billion: $7.8 billion (in 93 deals) down from $14.24 billion (in 143 deals) in 2019.

2020 kicked off the decade with accelerated growth in financing rounds in the Israeli high-tech market, as revealed by the 

The Israeli Tech Review revealed that in 2020 a total sum of $9.9 billion was raised in 578 financing rounds, from Israeli and foreign investors –representing a 14% increase in the number of deals and an increase of 27% in capital volume compared to 2019.

Amongst other factors, the average and median numbers increased in 2020 due to seven investments, each of over $200 million, compared to three in 2019.

2020 marked a second record in the funding of publicly traded high-tech companies, $6.55 billion raised by 121 companies compared to $1.95 billion by 68 companies in 2019. 

The most significant trend observed among investors was the focus on existing portfolio companies and increased follow-on investments.

 VC-backed deals increased both in monetary volume and number of deals, $8.74 billion in 371 deals, compared to $6.52 billion in 320 deals in 2019.

Investments in early rounds (Seed and A rounds) declined in the first two quarters of 2020 due to market uncertainties surrounding the COVID-19 pandemic. However, the third and fourth quarter of 2020, saw an increase in VC fund capital investments and the number of deals.

Growth companies (those in an advanced stage in terms of product maturity or revenues) raised record amounts in 2020, continuing the trend observed over the past two years. The total investments in growth companies were $8.33 billion. Early-stage companies raised $1.6 billion in 2020.

Mergers and Acquisitions (M&A)

In 2020, Israel witnessed a significant decrease in M&A deal-making, down to just $7.8 billion in 93 M&As, from $14.24 billion in 143 M&As in 2019 (for M&As of up to $5 billion).

As in 2019, US-based corporates accounted for 90% of all M&As.

Public Capital Markets

There were 18 IPOs by Israeli tech companies on local and foreign capital markets in 2020, with a total offering of $1.6 billion. Israeli public companies’ activity on the capital markets was $6.55 billion (including IPOs, follow-ons and RDs, PIPEs, equity, and debt) in 121 deals compared to $1.95 billion raised in 68 deals in 2019.

According to the report’s authors, Shira Azran, Mike Rimon and Itay Frishman, partners at Meitar: “While in 2020, primarily due to the COVID-19 pandemic, we saw a significant decline in the M&A activity of Israeli companies, we simultaneously experienced an increase in financing rounds in the number of deals as well as the capital invested in growth companies.

“The above demonstrates the maturity and development of the Israeli high-tech industry, manifested, among other things, in the increased number of unicorns”, the report’s authors said. 

“The year 2020 also saw a significant increase in financing by Israeli tech companies on the capital market, partly due to low-interest rates and the general hesitation in the markets in light of COVID-19. SPAC deals also experienced significant growth, as in the US, it was a record-breaking year in the number of SPAC offerings and the overall amounts raised in these offerings”.

“This trend will continue in 2021, and many of the large companies that have matured in recent years will examine the option of public capital markets for continued growth and development. We believe that it will lead to an increase in M&As in these companies, where traded shares will be used as currency”.

“2020 is ending on a strong note and with hopes for continued activity in financing and offering and renewed increase in M&As.”

“The year 2020 is an excellent example of why we need in-depth analysis from several viewpoints, to understand the Israeli high-tech activity,” said Guy Holtzman, CEO of IVC.

According to Holzman, after a challenging but successful year for Israeli start-ups, the Israeli high-tech ecosystem will continue to be a source of attraction for leading international financial and strategic players. Over the past year, foreign investors’ activity in Israel experienced significant growth, leading to a sharp increase in the volume of capital reaching young and mature companies. Holzman adds, “Faced with the financial challenges in the industry, the next year is expected to lead Israeli institutional investors increasing their involvement in the field, and helping local companies reach new heights.”

 

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