Israel’s fintech (financial tech) sector saw a significant funding boom in 2021, with investments in fintech startups and companies reaching $4.5 billion over the course of the year, according to a report published this week by Israeli investment firm Viola Group. That figure marked a 136% increase from 2020, which saw $1.9 billion in funding, according to the study.
Funding for fintech startups made up 17% of the overall investments in Israeli tech companies, the highest figure in six years, with “mega rounds” — single investments of $100 million or more — fueling “the lion’s share of growth in the fintech space,” according to the authors. Mega rounds amounted to nearly $3 billion of the overall funding total in 2021.
Companies that raised significant funding in 2021 included Melio, the developer of a payments platform geared toward small and medium-sized US businesses, with a Series D round of $250 million at a valuation of $4 billion; Tipalti, a developer of a payments and compliance tech platform with a $270 million investment; and business management software firm HoneyBook with a $250 million Series E round in late 2021 preceded by a $155 million investment earlier in the year.
In addition, 17% of all Israeli unicorns — private companies valued at $1 billion or more — are fintech or insurtech (insurance tech) companies. (Insurtech is often a fintech sub-sector). In addition to Melio, Honeybook, and Tipalti, among such unicorns are Rapyd, which facilitates multi-currency payments; Fundbox, a financial services and tools company that recently raised $100 million; and Next Insurance, a Silicon Valley-based insurance startup founded by Israeli entrepreneurs that uses machine learning to provide individualized policies to customers.
In the public markets space, 23% of all IPOs or SPAC mergers for Israeli companies in 2020 and 2021 combined were fintech companies. These include Payoneer, a developer of payment processing technologies, Riskified, a fraud prevention for e-commerce firm that went public on the New York Stock Exchange last summer, and insurtech companies Hippo and Lemonade.
Israeli fintech companies also made about 10 acquisitions of either Israeli or foreign startups in 2021, “solidifying their presence as category leaders in the global market,” the researchers said.
By segments, the fast-growing subsectors in fintech were insurtech, payments, trading and investing, and lending and financing, according to the report.
But the segment with the most traction was cryptocurrency and blockchain security technologies, emerging fields that inspire reluctance in traditional investors who fear the lack of regulation and transparency.
In 2021, crypto-related Israeli startups drew over $1 billion, according to the report. These include Fireblocks, the developer of a security platform for transferring digital assets which has raised over $1 billion since it was founded in 2018, and Starkware, a developer of solutions for blockchain technology.