Start-ups raised $5.9b. in third quarter

Israel’s hi-tech sector is showing no signs of slowing down. From July through September, Israeli hi-tech companies raised a whopping $5.89 billion in 177 deals, IVC and the Meitar law firm said in a report Wednesday.

That was the second-highest quarterly total ever, after companies raised $6.5b. in the preceding quarter of 2021.

In total, Israeli companies have raised an incredible $17.78b. in the first nine months of the year, already 71% higher than the total raised in all of 2020.

Twenty of the deals done in the third quarter were mega-rounds exceeding $100 million, and comprised 55% of the total amount raised. Some 51% of the fundraising done so far in 2021 has come from such mega-rounds.

Israeli start-ups have also seen a record number of exits, with 180 transactions worth $18.9b. in the first three quarters of the year. That’s 225% more deals and 506% more money raised than for all of 2020. Of those, 65 were hi-tech companies going public on capital markets, raising a total of $9.b. at an overall valuation of $76.4 billion.

Some 42 Israeli hi-tech companies chose to go public on TASE, the Israeli stock exchange. Another 11 companies went for a SPAC merger IPO – four in the third quarter – raising $2.9b. or 30% out of the total IPO values in this period.

The two most prominent IPO proceeds in the past quarter were made by Riskified ($418m.) and REE Automotive ($288m.).

Another $9.1b. was done in mergers and acquisitions. The capital volume of M&As ($9.14b) surpassed the $8.2b. sum achieved in 2020 ($8.2b.). Five M&A transactions of over $500 million each totaled $2.76b.

Early rounds (Seed and A) demonstrated an upward trend, with $2.5b. raised in 293 deals in the first nine months. Later rounds accounted for $15.3 billion (85% of total) raised in 282 deals.

“We see the continued effect of COVID-19 on our lives,” noted Adv. Shira Azran, a partner in Meitar Law Offices. “The technology sector accelerated with the world digitizing and transitioning to cloud in all areas, and along with the increased demand for cyber solutions. In addition to the continued growth of mature companies, we see two main trends – first, the increase in early-stage and seed rounds, and second, the increased participation of US investors, in all stages of investments in Israeli companies. We expect these trends to continue for the remainder of this year and next year.”

“While we see a certain slowdown of IPOs of Israeli tech companies,” said Adv. Mike Rimon, a partner in Meitar Law Offices. “we expect to continue to see significant equity financing activities as well as growth in M&A transactions due to an increasing number of companies that have raised significant amounts, whether through public markets (including through mergers with SPACs) or through private equity rounds, “In addition, we have recently been witnessing acquisitions of Israeli companies by other Israeli companies, which did not constitute a significant exit channel a few years ago; we expect this trend to become more common in the near future”.