February 2017 - Monthly Insights - Israeli Venture Capital
Updated: Aug 15, 2018
2016 RECAP - ISRAELI STARTUPS RAISE RECORD AMOUNT; 'EXITS' REMAIN STRONG
Recently published data by IVC Research Center covering 2016 supports our positive view on Israeli venture capital, as both fundraising and ‘exits’ continued to demonstrate strong growth. Fundraising by Israeli hightech companies reached a record of $4.8 billion in 2016. This reflects an increase of 11% from 2015 and a remarkable increase of 166% from 2012. 'Exits’ of Israeli startups, mostly through M&A transactions by foreign buyers, also remained strong, reaching $8.8 billion in 2016. Although part of the ‘exit’ proceeds in 2016 were attributed to the Playtika acquisition by Shanghai Giant Network Technology, our view remains that overall momentum remains positive. The report confirmed our earlier analysis related to the continued funding crunch in early funding rounds. Between 2013 and the first half of 2016, funding of early stage capital fell 58% (1$
million 5$ million rounds). The creation of more than 3,000 new startups between 2015 and 2016 seeking early stage funding is likely to exacerbate this funding crunch, and, as we see, a further widening in this supply and demand imbalance. This is likely to lead to lower valuations and creates a unique opportunity for investors, as favorable valuations are one of the most important contributors to venture capital returns. As we move into 2017, we are seeing many prominent Israeli venture capital funds looking to exploit the current strong environment to raise new funds, and our view suggests that these upcoming vintages may be the strongest to date in Israeli venture capital.
ORACLE SET TO LAUNCH CLOUD ACCELERATOR IN ISRAEL
As we move into 2017, we continue to witness strong growth in corporate venture capital activity in Israel, representing approximately 35% of investment activity in 2016. Oracle, who had purchased the Israeli startup Ravello for $500 million in 2016, decided to mark the 20 th anniversary of its Israeli subsidiary by announcing the opening of an accelerator in TelAviv, focusing on cloud based technology. The accelerator will select ten Israeli startups on an annual basis, to participate in its sixmonth long acceleration program, and will allow Oracle to expand its outreach towards seed stage companies. Oracle’s Senior Vice President of product development, Reggie Bradford, noted that "Israel has one of the most vibrant and exciting startup ecosystems around today with a rich heritage of innovation.”
NOTABLE INVESTMENT ROUNDS
SentinelOne, an UpWest Labs portfolio company, secured its series C funding for $70 million, and has accumulated investments of $109 million to date. SentinelOne develops endpoint security solutions through machine learning and behavior analysis
Kik Messenger, a Canadian messaging application, acquired Rounds, a mobile video app maker based in Israel, for an estimated amount of $70 million. Rounds had raised $24m from Sequia Capital (Israel), Samsung Ventures, Rhodium and Startup Factory, prior to its acquisition.
NOTABLE FUND FORMATIONS
RECOMMENDED VENTURE CAPITAL READS
Trump and Netanyahu set to discuss cyber security [Times of Israel] Who will be the next Israeli unicorn? [NoCamels] Working for an Israeli startup, an insiders view [GeekTime] TechCrunch takes an inside looks at the upcoming Snap IPO [TechCrunch] Will the next Disney come from China? The rise of Tencent [Jonathan Pan]