Israeli start-ups have raised $10.5 billion since the start of the year, matching the total raised for the whole of 2020, which was itself a record year, in less than half the time, Start-Up Nation Central said Tuesday.
2021 has already set a record for the number of mega-rounds (investments of over $100 million) raised, with 30 having been completed so far, compared to 21 mega-rounds throughout all of 2020. These rounds represent 53% of all capital raised, and for the first time, they account for more than half of the total funds invested.
The bulk of funding went to cybersecurity, fintech, and enterprise solutions companies, Start-Up Nation Central said. These three sectors pulled an accumulated $6.2b., or 60% of all investments. These sectors are all software, strongly B2B-oriented, and saw huge increases in demand for their solutions over the last year as work practices changed.
The significant rise in investments in Israeli hi-tech and innovation since the beginning of the year focused on the more advanced stages, with most of the capital (64%) invested in rounds C or later.
The median funding round amount more than doubled year over year from $6.8m. in 2020 to $14m. by June 8 in 2021. For later-stage companies in round B or higher, the median round size rose from $26m. in 2020 to $46m. in 2021. Early-stage companies experienced a similar boost in median funding from $4m. to $8m.
The marked increase in investments in Israeli tech companies (most of which originate from foreign investors) is even more pronounced when compared with investment performance worldwide, Start-Up Nation Central said. While Israel recorded an increase of 137% for the first five months of 2021 compared to the first five months of 2020, the increase globally was only 89%. Europe recorded an increase of 123% over the same period, while the US saw an increase of 91%, and Asia saw an increase of 69%, according to PitchBook data.
“The record funding in 2021 indicates that the growth in 2020 was not a short-term Covid-related boost but reflects top investors’ increasing trust in the Israeli innovation ecosystem,” said Uri Gabai, the incoming CEO of Start-Up Nation Central’s new Research and Policy Institute. “The significant increase in median deal size reflects a maturing ecosystem that is able to maintain its competitive edge as a global hub of technological innovation and offering problem-solving solutions. We hope a new budget by the expected incoming government will focus on growth-oriented policies such as enhancing the innovation ecosystem’s economic impact and tackling the chronic shortage in tech-oriented human capital.”