The number of first investments by VC funds in Israeli technology firms soared to a seven-year high in 2020, as the coronavirus pandemic pushed businesses and households online and gave the technology sector a boost.
The number of first investments — when a VC fund adds a company for the first time to its investment portfolio — totaled 620, an increase from 470 in 2019; 579 in 2018; and 439 in 2014, according to data published by IVC Research and law firm APM & Co., which have been analyzing first investments activity in Israeli tech firms since 2014.
The number of first investments by foreign VC funds was the highest in seven years, the data showed, totaling 339 deals. The number of Israeli VC first investments in 2020 was also the highest in seven years, totaling 281 deals. On average, in 2020, Israeli VC firms invested in three new companies, compared to an average of 1.6 companies per foreign fund.
In 2020, the two most active Israeli venture capital funds were Entrée Capital, with $345 million under management, and F2 Venture Capital, with $140 million under management. Both were equally active, with 14 first investments each.
American private equity and venture capital fund Insight Partners, with $5.8 billion under management, and Israel’s Peregrine Ventures, with $333 million under management, came in joint second with 13 first investments each in 2020.
“In 2020, we saw an increase in VC funds activity, despite the restrictions and difficulties during the epidemic,” said Marianna Shapira, research manager at IVC. “This increase reflects the resilience of the Israeli tech ecosystem as a leading sector in the Israeli economy.”
According to IVC’s data, most of the first investments, 64%, went to early rounds (seed and A rounds). Twenty-four percent of investments went to mid-rounds and 9% to later rounds. This compares to 73% of first investments going to early-stage firms, and 21% and 6% going to mid-rounds and later rounds, respectively, in 2014, indicating that there is a growing trend of new investments going to later rounds.
The number of first investments in later rounds has climbed by about 119% since 2014 and amounted to 10% of total initial investments in 2020, compared to just 6% in 2014-2016, the data showed.