February 2020 - Monthly Insights Israeli Venture Capital
News and Updates
LOOK BACK TO A RECORD BREAKING 2019 FOR ISRAELI VENTURE CAPITAL
Since 2010 capital raised by Israeli tech companies has grown by 400%, as 2019 marked a record year, capping a decade of extensive growth in capital invested in the Israeli high-tech industry. In 2019, 522 Israeli tech companies raised a record $8.3 billion, a 30% increase from $6.35 billion raised in 2018. This growth is mostly driven by the growing amount of foreign capital flowing into growth stage startups and the emergence of the “Mega Rounds” (rounds larger than $50 million). In 2019 alone we saw 20 such deals, which captured 35% of the annual capital raised by Israeli startups, spread across different sectors. Highlighted transactions include Lightricks (mobile aplications), a Viola Ventures portfolio company, which raised US$135 million, SentinelOne (cyber), an Upwest Labs portfolio company, which raised US$120 million and Vayyar (chips), an Amiti Ventures portfolio, which raised US$109 million. While the stark increase in growth stage rounds have propelled the valuations of Israeli growth stage companies, matching at times US growth stage valuations, early stage valuations remain constant and still benefit from a discount compared to US early stage rounds. This trend is driven by a stagnant capital inflow seen over the past five years in Israeli early stage companies, a trend which is also reflected in a global scale. From a sectorial perspective, IT and software companies, which in aggregate make up the largest sector in the Israeli technology industry, raised US$4.4 billion across 219 deals in 2019, an increase of almost 50% in the total amount raised compared to 2018. Other technology verticals such as cybersecurity remained at robust levels of activity during 2019 with US$1.8 billion across 78 deals raised, an 84% increase in the total amount raised compared to 2018.
Israeli High-Tech Capital Raising During 2019 Source: IVC Online
On the exit side, 2019 recorded a very strong year as the value of exits reached US$21 billion across 138 deals, led by the acquisition of Mellanox by Nvidia accounting for $6.9 billion. At the end of year, we also witnessed Habana Labs’ acquisition by Intel for US$2 billion designed to strengthen Intel’s artificial intelligence (AI) chip capabilities and accelerate its efforts in the nascent, fast-growing AI silicon market. Other large acquisitions included US cybersecurity company Palo Alto Networks acquiring of Demisto (an Accel portfolio company), a security operations platform that combines intelligent automation and collaboration into a single ChatOps interface, for US$560 million and the merger of Outbrain and Taboola which paid US$250 million to Outbrain for 30% of the merged content recommendation company.
Israeli High-Tech Exits During 2019 Source: IVC Online
In addition to a very strong M&A year for Israeli high tech companies, in 2019, four companies completed their IPO in the US including Fiverr (NYSE: FVRR), an online community offering a safe and fun place to easily hire people from around the world to do customized work, at a US$650 million valuation, and Tufin (NYSE: TUFN) which enables enterprises to centrally manage, visualize, and control security policies across physical networks and hybrid cloud environments, at a US$450 million valuation.
Notable Investment Rounds
Jolt, an UpWest Labs portfolio company, secured its series A round of $14 millionled by Balderton Capital with the participation of UpWest Labs, Hillsven and PICO Partners. Jolt is a network of learning spaces curated for people in the workforce seeking to gain a competitive business edge.
Iguazio, a Magma Venture Partners portfolio company, secured its series B funding of $24 millionled by INCapital Ventures with the participation of Magma Venture Partners, Dell Capital, Pitango, Robert Bosch Venture Capital and Verizon Ventures. The Iguazio Data Science Platform enables to develop, deploy and manage AI applications at scale and in real-time.
Verbit, a Viola Ventures portfolio company, secured its series B round of $31 millionled by Stripes with the participation of Viola Ventures, Vertex Ventures, and ClalTech among several others. Verbit uses artificial and human intelligence to provide a smart transcription and captioning solution.
Insight Partners, the American Venture Capital firm, acquired Armis Security for $1.1 billion, a Red Dot Capital Partners portfolio company which provides a security platform to address the new threat landscape of unmanaged loT devices.
ServiceNow, an American cloud computing company, acquired Loom Systems for $70 million, a Meron Capital portfolio company which develops cloud-based software that enables automatic analysis of alerts and logs from all enterprise systems.
Recommended Venture Capital Reads
Scientists may be able to conquer the coronavirus. But humanity's war against epidemics is endless. [Bloomberg] You can order nearly anything from Amazon. Soon, you may be able to get a small business loan. [Financial Times]
A thoughtful examination of what it might mean for VC and PE now that everyone seems to believe private markets are better than public ones. [The Economist] The Dodgers moved from Brooklyn to Los Angeles in 1958. Bernie Sanders still hasn't quite recovered. [The New York Times]