July 2020 - Monthly Insights Israeli Venture Capital
News & Updates
H1/2020 CAPITAL RAISING BY ISRAELI STARTUPS BREAKS RECORD HIGH, DESPITE GLOBAL PANDEMIC
Despite the continuous effects of COVID-19 and the worsening economic conditions set by the global pandemic, the funding growth for high-tech Israeli startups continued in the first half of 2020, albeit after a short hiatus during February and March. Over the first half of the year, a total amount of $5.25 billion was raised by Israeli high tech companies through 312 deals, drastically surpassing the $3.7 billion raised through 258 deals in H1 2019. 170 of such rounds were completed during Q2, setting a new record for the number of investments in a quarter, beating the 168 previous high achieved in Q4 2018. Many of these deals accounted as follow-on rounds mainly driven by the need for investors to increase the runway of their portfolio companies to survive during a period of uncertainty, in which raising capital could be challenging and revenue projections could consequently decrease. Early stage investments, ranging from Seed to Series A Rounds, have seen a consequent slowdown during the first quarter of the year and more specifically during the months of February and March in which we have only seen 4 seed rounds and 23 series A rounds. The monthly data reveals that seed rounds during April and May (35) compensated for the relative weakness in February and March. The continuing growth of Israeli high-tech capital raising is also driven by the trend of growth stage investments and “Mega Rounds” (rounds larger than $50 million). In H1/2020 we saw 22 such deals compared to 20 “Mega Rounds” during the entire course of 2019, which captured over 42% of the capital raised by Israeli high tech companies during H1/2020. Highlighted transactions include Appsflyer (mobile marketing platform), a Magma Venture Partners portfolio company, which raised US$210 million, SentinelOne (cyber), an Upwest Labs portfolio company, which raised US$200 million and Pagaya (fintech), a Viola Ventures portfolio company, which raised US$102 million. It is important to mention that due to travel restrictions imposed since the beginning of Q2/20 we have seen a small decrease of foreign investors’ participation, as they captured only 52% of all investments made during Q2/2020, closer to it’s historical range of below 55%, compared to 58% of all investments made over the course of 2019. We believe that this shift may accelerate opportunities in the market for local early stage investors, due to the increasing withdrawal of foreign investors from these stages in the near to mid-term.
Israel High Tech Capital Raising Source: IVC Online
Despite the instability in global private and public markets, Israeli companies were able to achieve a total exit value of $5.82 billion in H1 2020. While this represents a 22% decline to H1 2019 values, the average exit value ballooned to $112 million compared to $98 million. There were over 3 exits valued at over $1 billion including CheckMarx acquired by Hellman and Friedman for $1.1 billion, Armis acquired by Insight Partners for $1.1 billion and Moovit acquired by Intel for $1 billion. These figures do not include the IPO of Israeli-based insurtech company Lemonade, that went public in the NYSE, raising $319 million at a valuation of $1.6 billion. It has fared well in public markets, with its market capitalization jumping to over 4 billion since its IPO on July 2nd, 2020. However, a closer dive into these exits illustrate how the global pandemic, for the most part, signaled a halt in exits after the world was forced into shutdown. This coincides with the general need for large corporations to focus on stabilizing their liquidity levels, protect their customer bases across most verticals and deal with the current unpredictable public markets. High-tech startups in Israel have shown their resilience to the pandemic, especially in sectors which have benefited from the move to the “cloud.” As we are seeing a global acceleration of enterprise cloud adoption and digital transition due to the new work-from-home trend, there are many technology sectors which are benefiting from the coronavirus including cybersecurity, cloud connectivity, fintech, and digital health.
Notable Investment Rounds
Pagaya, a Viola Ventures portfolio company, secured its series D round of $102 million led by GIC with the participation of Viola Ventures and Siam Commercial Bank among others. Pagaya is an alternative asset manager utilizing data-driven investment techniques in the fixed income and alternative credit markets.
CyCognito, an Amiti Ventures and an UpWest Labs portfolio company, secured its series B round of $25 million led by Accel with the participation of Lightspeed Venture Partners, Sorenson Capital, Amiti Ventures and UpWest Labs. CyCognito has developed a platform that enables clients to identify all of the attacker-exposed assets in their IT ecosystem, providing them with a complete view of the attack surface.
Codefresh, a Viola Ventures portfolio company, secured its series C round of $27 million led by Red Dot Capital Partners with the participation of Viola Ventures and Vertex Ventures and Hillsven Capital. Codefresh is a continuous delivery and collaboration platform for containers and microservices.
Lemonade (NYSE: AYLA) an Aleph VC portfolio company which offers homeowners' and renters' insurance powered by artificial intelligence and behavioral economics, raised $319 Million in its Initial Public Offering on the New York Stock Exchange on July 2 at $29 a share which valued the company $1.6 billion. As of July 28, the share price increased to $73 which values the company at $4 billion.
NetApp (NASDAQ: NTAP), the American hybrid cloud data services and data management company, acquired Spot for $450 million, a Vertex Ventures portfolio company that offers cloud service and management optimization for SaaS companies, executed by AI software that among other things predicts price changes, essentially helping companies find cheap cloud infrastructures (called spot instances) and manage them.
Frequent trades, risky options contracts and a volatile stock market have been very good for Robinhood's business. The same factors have had different results for some of the app's users. [The New York Times] In past decades, jaw-dropping returns transformed hedge fund managers into some of the financial world's biggest stars. These days, though, the industry is confronting a humbling new reality. [Bloomberg] US investors have eagerly pushed into China over the past decade, often won over by enormous growth figures. But there's still a multibillion-dollar question to be answered: Can they trust the numbers? [Institutional Investor]