Israeli high-tech companies raised $5.24 billion in 620 deals in 2017, an increase of 9 percent compared to the $4.83 billion attracted in 2016, in 673 deals, Israel’s IVC Research Center and attorneys Zysman, Aharoni, Gayer & Co. (ZAG S&W) said in a report Wednesday.
The total capital raised by Israeli high-tech companies has been growing since 2013, the data showed. The jump in 2017 was fed by four large deals of over $100 million each, capturing 12 percent of the total amount raised. These were funds raised by cybersecurity startup Cybereason, ridesharing firm Via, AI- insurance firm Lemonade and Skybox Security.
The average financing round in 2017 rose to an average $8.5 million in 2017, from an average $3.6 million in 2013, the IVC-ZAG 2017 Israeli High-Tech Capital Raising Survey said.
Israeli VC funds invested $814 million in 2017, the highest sum since 2013, and an increase of 25 percent from $651 million in 2016, making up some 16 percent of all of the money raised by Israeli high-tech companies, with the other 84% of funds raised by foreign VCs and other investors, both Israeli and foreign.
In 2017, as in the past two years, companies in growth stages (mid and late stages) attracted the largest part of the total capital raised — raising $3.9 billion, compared to $3.4 billion in 2016. Mid-stage companies increased their share to $2.1 billion in 2017, compared to $1.8 billion in 2016. Seed and early stage companies raised $1.36 billion in total throughout 2017, compared to $1.43 billion the previous year.
“As IVC analysis shows, investors poured more capital into fewer selected companies, providing portfolio companies the necessary means to mature,” Marianna Shapira, research director at IVC Research Center, said in a statement.
Investment in artificial intelligence startups surged to $1.1 billion in 2017, from 967 million in 2016 and just $180 million in 2013. Investment in cybersecurity firms totaled $791 million, up from $595 million in 2016 and $190 million in 2013. Investment in automotive technologies jumped to $810 million, in 2017, from $644 million in 2016 and $120 million in 2013. Even as the amounts invested rose in all three sectors for the fifth year in a row, the number of investment deals made in cybersecurity startups declined in 2017, showing that fewer companies had raised larger amounts.
Leading all sectors, software companies raised $1.9 billion in 208 deals in 2017, similar to 2016, which totaled $1.7 billion in 209 deals. Life sciences companies raised $1.2 billion, 4% more compared to the $850 million raised in 2016. Semiconductor companies raised $348 million compared to just $124 million in 2016. Communication companies showed a decline in the number of deals and total capital raised — $569 million in 72 deals, compared to the exceptional $872 million in 106 deals in 2016.
10 startups raise $480 million in funds via ICOs
Last year, 10 Israeli high-tech companies, including Sirin Advanced Technologies and Bancor Protocol Foundation, raised $480 million through initial coin offerings, meaning the funds were raised in return for cryptocurrencies they issued. This amount is separate from the $5.24 billion figure raised by Israeli startups in 2017, IVC said.
The use of ICOs was seen favorably in 2017 by blockchain companies that wished to get both capital and recognition, the report said. 2017 was the first year IVC tracked the funds raised through ICOs.
From a financial perspective, a coin offering is not considered an investment, but has some characteristics of a financial asset. “As such, the hype which we witnessed in 2017 can indicate a similar pattern going forward, or a change in the dynamics and a tremendous crash,” the report said.
Israeli VC funds raised $1.3 billion in the course of 2017, the report said, and these funds have some $3 billion in capital available for follow-on and first investments.
“This indicates that there is money available for the local tech industry,” said Shapira.