April 2019 - Monthly Insights Israeli Venture Capital
Updated: May 21, 2019
News and Updates
NVIDIA ACQUIRES ISRAELI CHIPMAKER MELLANOX FOR $6.9BN; THE ISRAELI SEMICONDUCTOR INDUSTRY’S LEGACY: PAST AND FUTURE
Nvidia, one of the largest processors manufacturers in the world, announced last month that it will acquire Mellanox, one of Israel’s leading chip manufacturers for US$6.9 billion in cash, representing the largest acquisition ever for Nvidia and putting Mellanox as the second largest exit in Israel’s history, after Mobileye (acquired by Intel for US$ 15.3 billion). The acquisition process of Mellanox was quite competitive, with other leading chip manufacturers, such as Intel, also looking to acquire the company. On the back of the acquisition, the CEO of Nvidia, Jensen Huang, visited Israel noting to reporters that "One of the things I've learned about Israeli companies is that everyone wants them. I don't know of any large company in the world today that doesn't want to be in Israel. Ask the bankers - all of the companies wanted Mellanox. Look at me - I won”. Huang also disclosed his interest in other Israeli companies, specifically Habana Labs and Hailo which design chips for artificial intelligence - "I haven't met either of them, but I would certainly be happy to meet each of them. I've been in the high-tech industry for 26 years. I've seen many large companies, and these sound like very promising companies."
Mellanox CEO, Eyal Waldman (left) and Nvidia CEO, Jensen Huang (right)
For those well versed in the Israeli tech industry, the acquisition comes as no surprise, as Israel has a long legacy of technological success in the chip and semiconductors space. Israel’s history in the semiconductor industry can be traced back to 1974, when Dov Frohman, one of Intel’s first employees and inventor of EPROM – the erasable, programmable, read-only memory chip that eventually led to the creation of flash memory – left Silicon Valley to return to Israel. Frohman had been asked to establish a small chip design center in Haifa, which, at the time, was Intel’s first center outside of the U.S. Along with Intel, several other multinationals such as Motorola, established their operations in Israel during such years.
The initial expansion of global companies into Israel allowed for a local industry to flourish and become a world leader in semiconductors innovation. Some of these early innovations included the 8088 processor (designed in 1979), which was used in the IBM PC. Many subsequent generations of the Intel microprocessors were developed in Israel, including Banias, Merom, Yonah, Centrino, Ivy Bridge, and Sandy Bridge, which are found in most desktop and laptop computers. The first multifunction printer on a chip, the first system controller on a chip, and the first Ethernet switch on a chip (1990s), were developed by Galileo Technology (now part of Marvell). The flash drive marketed as DiskOnChip (1995), the first USB flash drive marketed as DiskOnKey (1999), and the TrueFFS (True Flash Filing System, 1992) which presented flash memory as a disk drive of the computer, were all developed by M-Systems, an Israeli company, acquired by SanDisk for US$1,3 billion in 2006 .
Building on such achievements, the Israeli semiconductor industry has now grown to employ over 20,000 people across dozens of companies. Almost all of the world’s leading semiconductor firms have significant R&D centers in Israel, alongside a large number of local semiconductor companies. The industry is now one of the most advanced internationally, with the second highest concentration of design houses in the world.
We have recently seen a new birth of innovation in the semiconductor space, specifically coming from successful entrepreneurs developing new solutions centered around the cloud and AI. Leading Israeli companies in the field include Pliops, a portfolio company of Viola Ventures and State of Mind Ventures, founded by former founders and senior employees of M-Systems, Samsung and XtremIO, which recently announced a US$30 million Series B financing, led by Softbank Ventures Asia. The company is looking to build a new product enabling cloud and enterprise data centers to access data up to 50X faster with 1/10th of the computational load and power consumption- solving the scalability challenges raised by the cloud data ‘explosion’ and the increasing data requirements of AI and ML applications.
Another leading company in the semiconductor field is proteanTecs, a portfolio company of Viola Ventures, founded by the former founders of Mellanox, which recently announced a US$35 million Series B financing, led by Intel Capital, ITI Venture Capital Partners and Mitsubishi UFJ Capital. proteanTecs is developing a product around the combination of hardware agents embedded in chips and the software that analyses the performance of electronic systems. The product aims to predict failures before they happen, a critical component for zero-failure systems such as autonomous vehicles.
Overall, we remain quite bullish on the future success of the semiconductor industry in Israel, both as an economic driver and as a source of innovation. This view is in-line with our strategy to partner with funds which invest in deep-technology solutions, many of which are in the semiconductor space. Notable Investment Rounds
Notable Investment Rounds
Pagaya, a Viola Ventures portfolio company, secured its series C funding of $25 million from Oak HC/FT and current investors. Pagaya is an AI based asset manager in the consumer credit space.
Lemonade, an Aleph portfolio company, secured its series D round of $300 millionled by SoftBank. Lemonade is the first fully automated insurance company in the world.
Innoviz, a Magma Venture Capital and Amiti portfolio company, secured its series C funding for $132 million from Shenzhen Capital, China Merchants Capital and New Alliance Capital. Innoviz is one of the leading global companies in the development of LiDAR sensors for autonomous vehicles.
SolarWinds (NYSE:SWI), a US based software company, acquired Samanage, a Viola Ventures portfolio company, which provides cloud computing services to corporate IT departments, for $350 million.
McDonald's (NYSE:MCD), acquired Dynamic Yield, a Viola Growth portfolio company, which provides retailers with an AI powered "decision logic" technology, for over $300 million.
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