The Israeli high-tech sector set yet another record in investments with $10 billion raised by Israeli startups in the first six months since the beginning of 2021.
This upward trend is a continuation of 2020, which also set a record in high-tech recruitment with a volume of investments of $ 10 billion in 12 months. Now, only six months into the year, Israeli start-ups have broken the 2020 record with six months still ahead, as investors continue to inject cash into technology companies, which continue their capital raising campaigns.
These numbers consist of a significant uptick in the volume of funds flowing into the Israeli startup industry. A total of $7.5 billion was raised in 2019, and $6.5 billion in 2018.
Nimrod Cohen, founder and partner of the TAU Ventures fund which invests in Israeli high-tech companies, said that “in the last year we have seen an explosion in everything related to investments, both in terms of amounts and value. Some say it is a bubble, although I think the process that has happened in the last year in the world and accelerated by the Coronavirus, is essentially the understanding that technology is everywhere and critical to any industry.”
“We, our children, and our parents touch technology from the moment we wake up in the morning until we go to bed. I assume that this internalization, combined with low-interest rates and lack of investment alternatives, is part of the explanation for the increased cash flow,” he explained.
The capital raising in the first half of the year included 28 “unicorn” companies, startups each worth a billion dollars or more.
Thirty of the rounds of funding amounted to $100 million and more, and these mega-rounds together constituted more than $5 billion of the total capital raised.
The three high-tech sectors to which most of the investments were directed are cybersecurity, financial technology, and enterprise software.
Lee Mozer, founder and partner at AnD Ventures, noted that “the past year has accelerated a lot of processes in the world of investments in high-tech, and Israeli high-tech in particular,” but cautioned that “this flood of money causes some start-ups to grow too fast and skip important steps in building a stable company. Entrepreneurs find themselves with double the amount they wanted to raise, with an investor who is not necessarily strategically suitable for them. Matching the investor to the company is even more important when it comes to early-stage ventures. Excess money in the markets must not cause entrepreneurs to lose focus on building a stable company, starting with the critical first steps for growth and connecting with the right investors.”
Hundreds of millions of dollars in fundraising have become routine. January opened with the announcement of OwnBackup, a company that develops cloud backup and data recovery solutions, announcing a $167.5 million round to a value of $1.4 billion.
High-tech companies also reported significant investment closures in 72 hours. For example, the cyber company Orca Security quickly raised investments in a round of $210 million, at a value of $1.2 billion, just two years after it was established.
Another phenomenon that contributed to breaking the record is dense capital raisings. The cyber company Salt Security raised three rounds in less than a year amounting to $120 million, the last of which was raised last month with $70 million. According to Roi Eliyahu, the company’s CEO, he did not plan to raise the other two rounds and turned away investors, and the reason he agreed to raise additional capital is that the investors were strategic partners for the rest of the way and did not need cash.
Dekel Persi, founder and partner of the TPY fund, explained that “Israeli high-tech is undergoing an accelerated evolution, which is reflected in companies and entrepreneurs that can grow into giant companies and not just companies worth tens or hundreds of millions. Some of the reasons for the acceleration are of course the Corona, and the continuation of a low global interest rate environment, which makes the technology sector a desirable investment.”