Israeli tech firms raise record $8.3 billion from investors in 2019

In the 2010-2019 period a total of $39.1 billion was raised, with 2019 seeing a ‘whopping’ 400% rise in dollar terms since 2010, IVC-Zag-S&W report shows

Shoshanna Solomon is The Times of Israel's Startups and Business reporter

Illustrative image of a handshake (iStock by Getty Images)
Illustrative image of a handshake (iStock by Getty Images)

Israeli tech firms raised a record $8.3 billion in 2019, a 30 percent rise from 2018, in 522 funding deals, a report by IVC Research Center (IVC) and law firm Zag-S&W shows.

For the period of 2010-2019, Israeli tech firms raised a total of $39.1 billion — with the 2019 figure representing a “whopping” 400% rise in dollar value, and a 64% surge in the number of deals, compared with 2010 figures, the report showed.

In 2018, Israeli tech firms raised $6.35 billion in 532 deals, and in 2010 Israeli tech firms raised $2.1 billion in 319 deals, the IVC figures show.

VC-backed deals totaled a record amount of $6.4 billion in 2019 compared to $4.75 billion in 2018 and $1.13 billion in 2010. Deals with VC participation captured 60% of the total number of deals in 2019. The dollar volume of deals in which VCs took part captured 77% of the total raised in 2019.

“2019 marked a record year, capping a decade of successive increases in capital invested in the Israeli high-tech industry,” said Shmulik Zysman, managing partner and tech industry leader at Zysman, Aharoni, Gayer & Co. (ZAG-S&W) in a statement.

The growth in figures is partly due to the growing foreign capital invested in the Israeli tech industry, and investments are in a wide range of fields, from software and the internet through life sciences to semiconductors.

Even so, there is a worrying trend of VCs preferring to invest in later-stage companies and shunning early-stage ones, a phenomenon that started to be seen in 2017 but became a trend in 2019, Zysman said. In 2019, the total capital invested in early-stage companies decreased to $148 million, from $169 million in 2018 and $184 million in 2017.

In 2019, later rounds continued to attract large amounts of capital, raising $2.88 billion compared to $1.91 billion in 2018.

“Mega” funding rounds, defined as worth more than $50 million, peaked in 2019 with 41 deals capturing 50% of the annual capital inflow. All companies that attracted more than $100 million each — 20 deals overall in 2019 — were mostly in the software sector.

The continued increase in the amounts invested in mature startups is due to new investors, such as Israeli and foreign private equity funds, IVC’s CEO Guy Holzman said in the statement.

The software sector continued to lead capital raising in 2019, reaching $4.4 billion in 2019, an increase of almost 50% compared to 2018. Twenty-six deals, each over $50 million, captured 58% of the total amount raised in the software sector last year.

Interest in startups specializing in artificial intelligence technologies soared: AI-based firms raised $3.7 billion in 199 deals in 2019. Eighteen deals, each over $50 million, accounted for 55% of the amount. In 2018, AI firms raised $2.03 billion in 166 deals while in 2012, the latest available data in the report, they raised $170 million in 33 deals.

Cybersecurity companies raised $1.88 billion, up from $1.02 billion in 2018, and fin-tech companies attracted $1.7 billion in 2019, up from $880 million in 2018.

Life sciences companies raised $1.37 billion in 121 deals in 2019 compared to $1.18 in 102 deals in 2018.

Looking ahead at 2020, the authors of the report said that “barring any dramatic changes in the macroeconomics conditions, the Israeli private market will continue to attract investors” and the “allocated capital for large and more established companies will continue to grow.”

The number of first investments is expected to continue its slowdown, while AI and cybersecurity firm will continue to be hot fields for investors.

Several Israeli startups held initial public offerings of shares in 2019, and indications are that even more companies will explore the IPO option in 2020, the authors said.

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