Strong incentives for UAE investors to target the Israeli high-tech market are underlined in a first of its kind report, following record investment activity and growth in 2020, despite the COVID-19 pandemic.
The IVC-Meitar Israeli Tech Review 2020 points to many maturing Israeli tech companies turning to capital markets this year among trends creating opportunities for UAE investors capitalising on the new trade links between the two countries.
The report underlines the market’s huge appeal to foreign investors who far outperformed their Israeli counterparts during funding rounds and in follow-on investment. Foreign investment was also behind the vast majority of the year’s largest deals above $100 million.
Providing detailed analysis on a record-breaking year in financing rounds, the report reveals that Israeli tech companies raised $10.2 billion in 607 deals in 2020, an increase of 31% in the volume of capital and a 20% increase in the number of deals compared to 2019.
A record number of publicly-traded Israeli tech companies raised $6.96 billion by 128 companies compared to $1.95 billion by 68 companies in 2019, and Israel’s leading law firm in the high-tech market, Meitar Law Offices, forecasts a continuing trend of maturity and development in 2021.
Published by Meitar and IVC Research Center, Israel’s leading research specialists in high-tech and venture capital, the report provide a comprehensive analysis of the Israeli high-tech ecosystem activity, now of high interest to UAE investors for the first time.
It shows foreign investors contributed $6.26 billion in funding rounds and $7.34 billion in follow on investments last year compared with $1.91 billion and $2.58 billion respectively by Israeli investors. In large scale deals, foreign investors accounted for 88% of those over $100 million and 82% of deals over $30 million.
M&As deals under $5 billion fell to $7.96 billion (99 deals) in 2020 from $14.26 billion (143 deals) in 2019, primarily due to COVID-19.
“Despite this, we simultaneously experienced an increase in financing rounds by Israeli and foreign investors, in the number of deals as well as the capital invested,” said Shira Azran, Partner at Meitar.
“Specifically, financing among growth companies showed a significant increase, as did the total number of rounds. This demonstrates the maturity and development of the Israeli high-tech industry, manifested, among other things, in the increased number of companies that have crossed the billion-dollar valuation.
Last year saw a significant increase in financing by Israeli tech companies on the capital market as well as significant growth in SPAC deals. “We see this trend continuing in 2021, and many large companies that have matured in recent years will examine the option of public capital markets for continued growth and development,” said Azran. “We believe it will lead to an increase in M&As in these companies, where traded shares will be used as currency”.
Guy Holtzman, CEO of IVC, said, “This first comprehensive report on the Israeli high-tech industry, combining data on financing, exits, and capital markets activity, will be particularly helpful to UAE investors exploring opportunities in Israel for the first time.
“After a challenging but successful year for Israeli start-ups, the Israeli high-tech ecosystem will continue to be a source of attraction for leading international financial and strategic players.
“Over the past year, foreign investors’ activity in Israel experienced significant growth, leading to a sharp increase in the volume of capital reaching young and mature companies.
“Faced with the industry’s financial challenges, the next year is expected to see Israeli institutional investors increasing their involvement in the field, and helping local companies reach new heights.”
VC-backed deals increased in 2020 both in monetary volume and number of deals to $8.95 billion (384 deals) compared to $6.52 billion (320 deals) in 2019.
Investments in early rounds (Seed and A rounds) declined in the first two quarters due to market uncertainties surrounding COVID-19. But Q3-Q4/2020 saw an increase in VC fund capital investments and the number of deals. Total investments in growth companies were $8.54 billion, while early-stage companies raised $1.63 billion.
There were 19 IPOs by Israeli tech companies on local and foreign capital markets in 2020, with a total offering of $1.6 billion. Israeli public companies’ activity on the capital markets was $6.96 billion (including IPOs, follow-ons and RDs, PIPEs, equity, and debt) in 128 deals compared to $1.95 billion raised in 68 deals in 2019.
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