Israeli hi-tech firms raise record $6.4b. in 2018

Following the trend of recent years, deals below $5 million continued to decrease, while deals exceeding $20 million continued to grow.

By EYTAN HALON
Updated: JANUARY 10, 2019 00:56
A cityscape of Tel Aviv is seen during the night-time in Israel May 27, 2017. Picture taken May 27, 2017. (photo credit: REUTERS/AMIR COHEN)
A cityscape of Tel Aviv is seen during the night-time in Israel May 27, 2017. Picture taken May 27, 2017.
(photo credit: REUTERS/AMIR COHEN)
Israeli hi-tech companies raised a record $6.4 billion in 623 financial deals in 2018, marking a sixth consecutive year of record growth in capital raising, according to data published on Wednesday by IVC Research Center and ZAG S&W Zysman, Aharoni, Gayer & Co.
While the number of deals decreased slightly from 661 in 2017, the total capital raised was 17% higher. Since 2013, annual hi-tech funding has soared by some 120%.
Following the trend of recent years, deals below $5 million continued to decrease, while deals exceeding $20 million continued to grow. Larger deals have almost quadrupled since 2013, and were worth a total of $4.1 billion in 2018 – some 63% of the total funds raised.
The final quarter of 2018 saw a record 34 deals worth more than $20 million each, valued in total at $1.3 billion.
Five particularly large deals were concluded in 2018: $300m. raised by Landa Digital Printing, $165m. by Jfrog, $150m. by Insightec, $125m. by Trax and $100m. by eToro.
Venture capital-backed deals totaled $4.7 billion in 2018, although the number of deals decreased for the first time since 2014. The average venture-backed deal stood at $14.4m. in 2018, 36% higher than 2017 and almost double the 2014 average.
“2018 was a busy year for Israeli hi-tech capital raising,” said Marianna Shapira, research director at IVC Research Center.
“Most of the capital was raised by well-established software companies with annual revenues of up to $10m. in the verticals of AI and cyber security. The term ‘wealth attracts money’ describes the continued investment trend in Israel, as in the US,” she said.
In terms of sector growth, Israeli software company capital raising has continued to flourish, marking an increase of over 50% since 2015 and six-fold since 2013. More than $1 billion was raised in 13 mega software deals (over $50m.) alone during the last year. It was also a record year for Israeli cybersecurity and fintech companies.
Life sciences deals, dominated by medical device companies, remained stable at $1.2 billion across 126 deals.
“Over the course of 2018, there was a noticeable trend of foreign funds and investors, whose investments in Israel rose by more than $1 billion compared to last year,” said Shmulik Zysman, managing partner at Zysman, Aharoni, Gayer & Co.
“A surprising and different factor is the trade war between China and the US: when those two are quarreling, Israeli companies are the ones that profit. Israeli hi-tech companies have become the indirect route of Americans to China, and of the Chinese to the US.”
Last year saw American capital investments in Israeli hi-tech grow from 30% to 35% of foreign capital, and Chinese investments constituted 3%. Israeli investment in home-grown companies slipped from 34% to 30%.