A general view of Tel Aviv's skyline is seen through a hotel window in Tel Aviv, Israel May 15, 2017..
(photo credit: AMIR COHEN - REUTERS)
Investment in Israeli hi-tech showed no signs of slowing down in the first quarter of 2019, as companies raised $1.55 billion in 128 deals.
Hi-tech companies raised 28% more in funding and closed 15% more deals than during the same period in 2018, according to a report by IVC Research Center and international law firm ZAG-S&W.
The first quarter results follow a particularly active end to last year, with $1.94b. raised in 170 deals during the fourth quarter of 2018.
The median deal size during the first quarter increased to $6 million, primarily due to five deals exceeding $50m., including two deals surpassing $100m. each, secured by Innoviz ($132m.) and DriveNets ($110m.). The two largest deals constituted approximately 16% of total capital raised during the quarter.
In keeping with recent trends, reflecting a trend of industry maturation, investors demonstrated a preference for injecting larger sums of capital into late-stage companies. Seed round investments declined to $51m., compared to $54m. during the same period in 2018.
Deals larger than $20m. attracted almost two-thirds (64%) of the total amount invested in the first quarter. While later round funding dropped to approximately $206m. in 17 deals, Series C investments increased to $476m. in the same number of deals, the largest number of deals and funding in the past four years.
“Israeli hi-tech opened the year 2019 with momentum,” said ZAG-S&W founder and managing director Shmulik Zysman.
“We are particularly optimistic as the first quarter of 2019 was the most successful first quarter in the past six years, both in terms of total funding and number of transactions.”
Some $1.3b. of funding was raised in 71 venture capital-backed deals in the first quarter, higher than the quarterly average in recent years, while non-venture capital deals raised $247m. in 57 deals.
“Another reason for optimism is the high involvement of venture capital funds in the amount of capital invested – one of the highest in the last five years,” said Zysman.
IT and software companies, the largest sector in the hi-tech market, raised $660m. in 57 deals during the first quarter of 2019.
Record investment, however, was witnessed among artificial intelligence (AI) companies, with 51 start-ups raising $599m. in the first quarter, compared to $369m. raised by 30 AI companies during the first quarter of 2018. The majority of AI-related investments were made in early-stage financing rounds.
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