Israeli tech firms reach unicorn status at double the pace in last decade: study

The average time for Israeli tech firms to become so-called unicorns – or companies with a value of over $1 billion – has halved in the past decade, new data shows.

According to a report by Catalyst Investments, it has taken on average six years for Israeli firms set up after 2008 to reach a billion-dollar valuation, as opposed to 15 years for Israeli unicorns set up between 1999 to 2008.

The number of Israeli unicorns has jumped in the past few years, from just one in 2013 to 18 in 2019, and to 65 in May 2021, the data shows.

A reason for this is that US investors in Israel have increased their activities in Israel, said Jonathan Cohen, an associate at Catalyst Investments who compiled the data.

Jonathan Cohen, an associate at Catalyst Investments (Ciona Shaked)

For investment rounds above $100 million, more than 70 percent of all rounds in those amounts occurred from 2019, he said, and 27 rounds (or 33% of all rounds over $100 million) were completed this year, from January to May 2021. Out of these 27 rounds of above $100 million, 23 were led or co-led by American institutions. By comparison, only a third of the rounds were led by American investors prior to 2019, he said.

There are a number of reasons for the increased amount of money invested by US investors, he said. The Israeli venture capital fund and private equity ecosystem is maturing, with more companies and experienced entrepreneurs succeeding in convincing US corporates and institutions to invest larger amounts in the country.

In addition, the so-called Startup Nation has developed a large number of companies valued between $300 million and $3 billion “that are good targets of mid-cap and large-cap investors, for either large investments or buyouts.”

Not only that: US investors consider Israeli companies a cheaper investment than their US counterparts; lastly, Israel’s ability to cope with crises such as the Covid-19 was “a great advertisement” for the Israeli companies and the whole economy, he said.

Cohen said that the increased US investor interest is helping boost interest from other regions, including China and the EU. “The fact that the US is the first mover in terms of large investment rounds opens doors to other large international investors, notably Chinese players,” he said. “With an increasing maturity of other regions such as Asia and the GCC, Israel could expect to be, one day, the home of more than 100 unicorns.”

Investors ploughed some $10 billion into Israeli tech firms in 2020, and $5.4 billion in the first quarter of this year.

Catalyst Investments is a fund set up by Edouard Cukierman, Yair Shamir and Boaz Harel, which has over $400 million under management. The fund focuses on fostering medium-sized startups in fields ranging from telecom, advanced manufacturing, IT, medical equipment, and life sciences. Some of the prominent portfolio companies include: Mobileye, Tufin Technologies, Taboola, Arbe Robotics.