Over the course of 2021, Israeli companies raised an “exceptional” $25.6 billion in private investments, shattering 2020’s previous record of $10.3 billion in funding,” according to data released Monday in the IVC-Meitar Israel Tech Review, a report published by the IVC Research Center and the law firm Meitar.
“This exceptional amount was 146% higher than the annual 2020 amount, mostly due to the large number of deals over $100 million that accounted for a 55% share [or $14 billion] of the total sum for 2021,” the report read. This is attributable to the growing number of unicorns.
The IVC-Meitar report said there were 773 recorded investment deals in 2021 including 77 mega-rounds of over $100 million in funding or more. The number of deals was up from 604 in 2020, with 20 mega-rounds.
In 2021, these rounds included investments in cybersecurity firm Claroty, which raised $400 million last month in a round led by Softbank, food tech startup Future Meat, which raised $347 million for cultured chicken, fintech startup Melio, which raised $250 million, global payroll and payment management platform Papaya Global with a round of $250 million, and internet of things (IoT) firm Wiliot, which raised $200 million in July, also with SoftBank.
According to the report, the last quarter of 2021 was the strongest, with investments totaling $8 billion in 206 transactions in the last three months of the year.
The number of deals reached an unprecedented level in 2021. According to IVC’s estimation, the projected deal number by the end of the year will reach 1,840, an over 33% gain over 2020. The research institute estimates the total number of deals after 24 months according to a methodology that takes into account information gaps.
Early rounds (Seed and A) were on an upward trend in 2021 with 408 deals and median amounts reaching $4 million, according to the report. Mid- and later rounds accounted for $21.9 billion of the $25.6 billion total in 2021, raised across 365 deals.
Cybersecurity and fintech companies drew the largest share of funds with $6.5 billion and $6.6 billion in investments, respectively, followed by IoT (internet of things) startups raising $2.9 billion and food tech startups raising $866 million as the third-largest category.
In 2021, too, foreign investments were the majority, accounting for a record $18.64 billion of the total capital, or 73%, a similar share to 2019 and 2020. The gap between local and foreign investments “has continued to grow,” the report said.
The year 2021 was an “extraordinary year for exits as well,” it read, with 75 IPOs (initial public offerings) in 2021, at an aggregative post valuation of $79 billion.
A PwC Israel report last month said that tech exits (defined as merger and acquisition deals or IPOs of shares) reached a value at $82.4 billion in 2021.
Of the 75 IPOs, 23 were on Wall Street, according to the IVC-Meitar report, with the rest on the Tel Aviv Stock Exchange, including fintech firm Nayax.
In addition, 13 companies preferred to take the SPAC (special purpose acquisition companies) route, raising a total of $2.93 billion on capital markets.
IPO processes are long and complicated, and companies have to open their books to prospective investors and regulators and meet minimum revenue and asset requirements. With SPACs, companies can merge with firms that are already listed publicly, allowing them to quickly enter stock exchanges.
Mike Rimon, a partner at Meitar Law Offices, said in a statement that “2021 was the year of the ‘Big Bang’ in terms of IPOs of Israeli companies in the US.”
“After years in which very few Israeli companies went public in the US, this year 23 Israeli companies listed their securities in the US, most of them at very high valuations,” he said, adding that this was due to the “extraordinary growth in the capital markets,” the maturity of Israeli companies in recent years, the growing involvement of US investors, and the unprecedented growth of the global technology sector.
These “impressive numbers are not the industry’s ‘new normal,’” read the report, they are “the outcome of a ‘new reality.'”
Rimon said the estimate is that 2022 will yield fewer IPOs, but “there is no doubt that in contrast to the past, an IPO became an extremely relevant exit alternative for many Israeli companies.”
He said the Israeli tech sector would see “further substantial activity in private offerings as well as growth in the number of M&A transactions.” Israeli companies that have raised large amounts of capital “are looking into buying other Israeli and foreign companies, indicating the maturation of the Israeli technology companies ecosystem,” he added.
A specific notable trend in 2021 was the increase in the number of Israeli startups acquired by Israel-based companies, with 39 such deals over the year, the highest number on record, according to a Start-Up Nation Central report last month.
The most notable among these local acquisitions were those of Avanan by cybersecurity giant Check Point and Vdoo by DevOps company JFrog.
IVC CEO Guy Holzman warned in the report that despite the unprecedented numbers, some Israeli tech companies “will have a hard time proving their value, and growing their revenues next year.”
Holzman added that the high-tech sector appeared to have reached “a certain ceiling with approximately 9,300 active tech companies” and noted that foreign multinational corporations and Israeli companies with strong resources continued to attract a skilled local workforce amid a talent an acute shortage of talent.