Israeli tech raises record $1.7 billion in Q2 – report

Data shows continued rise in value of deals, with a 39% jump in number of deals above $20 million

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

Illustrative photo of Israeli shekels. (Sophie Gordon/Flash90)
Illustrative photo of Israeli shekels. (Sophie Gordon/Flash90)

Israeli technology companies raised a record $1.7 billion in the second quarter of the year, up 55 percent from the same quarter last year and the previous quarter, according to the latest IVC-KPMG capital raising report.

There were 187 financing deals in the quarter, compared with the 174 high-tech financing rounds held in the previous quarter of the year.

The largest deal in the second quarter was the $300 million raised by mobile app company Gett, which accounts for 18% of the total proceeds. Even without the Gett deal, capital raised in second quarter reflects a 27% increase compared to the first quarter of the year.

The average company financing round peaked at $9.2 million, higher than the $6.5 million and $6.7 million averages of the first quarter 2016 and the second quarter 2015 respectively, the report said.

In the first half of 2016, Israeli high-tech capital raising reached $2.8 billion in 361 deals, 35% above the $2.1 billion raised in 327 deals in the first six months of 2015.

“All indicators point to a healthy and vibrant ecosystem that continues to mature and generate new companies. We are in the middle of the summer, and it seems that economic winter is not quite around the corner. Having said that, there is no doubt a significant portion of the growth capital recently raised was induced by the need to prepare for a rainy day,” Ofer Sela, partner at KPMG Somekh Chaikin’s Technology group, said in a statement.

The authors of the report pointed to a trend of a continued increase in the value of deals. Deals above $20 million increased both in number — 39%– and total capital raised, which jumped by 88%, compared to the first quarter of the year, the data shows.

The increase “in large deals is driven by the enhanced activity of foreign investors — primarily corporate investors and VC funds — in growth-stage companies,” Koby Simana, CEO of IVC Research Center, which tracks Israel’s high tech industry, said.

This increased activity is not limited to top-tier deals, but has trickled down also to low and mid-range deals. “This across-the-board trend leads us to believe 2016 will continue to be strong in capital raising, with a projected 20% year-on-year increase, or about $5.3 billion in total to be raised by the end of the year,” Simana said.

In the first six months of the year, some 57% of the deals included at least one foreign VC investor, compared to a 32% average in the first half of the previous two years.

For the second quarter of the year, Israeli venture capital funds invested $222 million in Israeli high-tech companies, a record amount and accounting for 13% of total investments. The amount was 43% above the $155 million average quarterly investment of the previous two years.

The communications sector led capital raising in the second quarter of the year, with 3% of the capital, including the Gett deal. Internet, software and life sciences were other three other sectors that raised the greatest amount of funds in the quarter, the report said.

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