July 2018 - Monthly Insights - Israeli Venture Capital
Updated: Aug 15, 2018
H1/2018 RECAP - CAPITAL RAISED BY ISRAELI STARTUPS ON PACE FOR RECORD BREAKING YEAR
Over the course of the first six months of the year, Israeli startups raised a record $3.1 billion and are on pace surpass the previous record amount raised in 2017 of $5.2 billion. This past six months also saw a continued increase in the amount of capital allocated towards late stage rounds (above $10 million), with over 66% of the capital allocated to such rounds, a testament to the maturity of Israel’s market. The greatest catalyst for the increase in late stage funding was the funding of "large growth" rounds, with over $1.7 billion invested in rounds of over $20 million, compared to $1.2 billion in H1/2017, an increase of about 40%. Early stage financing (seed stage, below $5 million) continued to decline in H1/2018 vs. H1/2017, with $245 million invested in H1/2018 compared to $291 in H1/2017, a decline of about 16%.
With more early stage companies looking for funding and less funding available for such deals, the supply-demand imbalance in early stage continued to worsen in the first six months of 2018. As a result, early stage companies find it more difficult to raise capital, as investors become more selective in the market. Early stage investors have also enjoyed attractive investment opportunities relative to later rounds, as pre-money valuations in late stage have almost increased by 3x over the past seven years relative to almost no change in early stage pre-money valuations.
From a sectoral perspective, in H1/2018 we continued to see the dominance of cyber-security in the Israeli venture capital market, with $427 million invested in the sector. Mobility related startups continued to expand on the back of a strong 2017, with $192 million invested in the sector, third after cyber-security and fintech ($344 million invested in H1/2018).
SWEETWOOD VENTURES PARTICIPATES IN INNOVATE ISRAEL 2018
Last week our team participated in the Innovate Israel 2018 conference which took place in London. Amit Kurz, Partner at Sweetwood Ventures, was one of the keynote speakers at the main event together with other industry leaders such as Ziv Aviram, Founder of Mobileye and OrCam, Kobi Samboursky, Co-Founder and Managing Director of Glilot Capital and Jon Medved, Founder and CEO of OurCrowd. Additional speakers included the founders and CEOs of leading tech companies in Israel such as WindWard (raised $32.2 million to date), ThetaRay (raised $60.5 million to date) and prooV (raised $21 million to date).
As part of the conference the speakers were hosted at the London Stock Exchange, where they officially opened the exchange for trading on the day of the conference at the presence of Britian's Minister of Universities and Innovation, Sam Gyimah.
Amit's keynote speech was titled "Future Trends in Venture Capital, a Global and Israeli Perspective" in which he discussed the most pressing issues which the venture capital industry is facing. Among these was the shift in the technology cycles from consumer targeted technology to machine driven technology, the increased activity of non-tech players in the tech industry and the emergence of secondary transaction as an alternative "exit" strategy of venture capital funds.
Please feel free to reach out should you like to receive a copy of the presentation.
Notable Investment Rounds
Trax, secured its series E funding of $125 million from Boyu Capital and current investors. Trax develops image recognition technology for the consumer goods industry.
PlainID, secured its series A funding of $11 million from Viola Ventures, Capri Ventures and iAngels. PlainID develops an identity management solution for large scale enterprises.
ThetaRay, a JVP portfolio company, secured its B funding for $30 million from JVP, General Electric and current investors in the company. ThetaRay is a provider of a unknown threat detection solution.
PHILIPS (EPA:PHIA), a dutch multinational technology company, acquired EPD a developer of a heart simulations platform, for $250 million (and up to $540 million, based on milestones).
Outbrain, an Israeli AdTech company, acquired AdNgin a developer of a solution for automated monetization by site owners, for an undisclosed amount.
Notable Fund Formations
Benson Oak, announced the formation of a new $100 million fund targeting investments in Israeli companies (across stages) with a focus on blockchain technologies. Benson Oak previously managed three investment funds, in the U.S., Czech Republic and Israel.
Recommended Venture Capital Reads
A boom in AI research is drawing the tech giants of Silicon Valley—and their checkbooks—to one of England's most storied university towns. [The New York Times] Contributions from tech titans and plentiful gadgets were supposed to turn Willie Brown Middle School into a beacon of education. Then it opened. [Wired] It was said the fallout of the financial crisis would dominate the global economy for a decade. Well, it's been a decade. How has the world changed? [London Review of Books]
America's new tax structure includes an item called Section 13301. It's 12 pages of text that could transform the private equity industry in ways no one anticipated. [The American Prospect]