In the second quarter of 2020, Israeli high-tech companies raised $2.5 billion in 170 deals, up 33% in number of deals from the second quarter of 2019 and up from $2.35 billion in the corresponding quarter of last year, IVC-ZAG reports. Despite the Covid-19 crisis, in the first six months of 2020, Israeli tech companies raised $5.25 billion in 312 deals, up from $3.9 billion in the first half of 2019. This leaves Israeli tech companies well on course to beat last year’s record fund raising of $8.3 billion.
ZAG-SW (Zysman, Aharoni, Gayer Co.) founding partner and head of the high-tech department Adv. Shmulik Zysman said, “After everything drew to a complete halt in March, it seemed that the total capital raising in the second quarter of 2020 would be significantly lower than the amounts we had become accustomed to in recent years; even the optimists among us were pleasantly surprised. To illustrate, despite the medical and economic virus, total second-quarter capital raising was one of the highest ever, and total investments in seed companies, which is the root of Israeli high-tech, rose dramatically in relation to the previous quarter.”
He added, “The strength of the Israeli high-tech industry is proving itself again. For example, total foreign capital invested in Israeli companies is lower than in recent quarters, but still significantly higher than the average of recent years. Compared to foreign funds, Israeli venture capitalists appear to have identified opportunities and invested above the average in recent years. As a veteran law firm that has seen all the crises of the past decades up close, we believe the second quarter results point to the strength of the high-tech industry, which will form the basis of the economy’s growth in the post-Corona time. But being hopelessly optimistic borders on irresponsibility; the data nevertheless indicate a decrease in total capital raising relative to the first quarter, a phenomenon that can certainly be repeated in the third and fourth quarters of 2020. Even if this is not a complete stop, it is certainly a kind of slowdown.”
IVC Research Center research director Marianna Shapira said, “As the year under the threat of Covid-19 develops, Israeli high-tech has endured both ups and downs in capital raising. The second quarter of 2020 delivered a certain relief, following the downfall of February-March figures. Israeli growth stage companies have a strong support from the global community of investors, even though the company valuations are driven down due to the weakened economies globally. Israeli tech has experienced a strong first half-year in fund raising, however, the second half of the year might yet demonstrate a notable slowdown in financial activity and capital raising efforts of Israeli high-tech companies in general, and especially in early round financing, as observed in the first quarter of 2020.”
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Venture capital funding
Capital raised in VC-backed deals in the second quarter reached $1.96 billion – 79% of the total dollar volume. The number of venture capital-backed deals was 96 – 57% of transactions in the quarter, in line with quarterly averages of past years. The impact of the coronavirus led to a substantial decrease in deal making throughout March of this year, when only 17 venture capital-backed deals were recorded, but solid numbers in the second quarter compensated for that.
Capital raising by rounds
Early rounds (Seed + A) in the second quarter of 2020 totaled 90 deals, up 36% from the preceding quarter. Later rounds (D and Later) continued to lead capital raising, with 62 deals in the first half of 2020, raising $2.43 billion.
Capital raising by deal size
The number of deals with lower amounts was of particular interest, following the decrease in investments in early rounds during the first quarter of 2020. In the second quarter of 2020, investment activity was strong in lower than $5 million and higher than $30 million ranges, so the data for the first half of 2020 was in the higher ranges of historical deal activity. The first half of 2020 saw 149 deals with amounts less than $5m, nearly 61% of the deals in this range for all of 2019.
At the high end of deal amounts, 48 deals were made in the first half of 2020 with investment amounts higher than $30m, totaling $3.43 billion, surpassing the amount in this deal range for all of 2018. Of these deals, 22 over $50m each took place in the first half of 2020.
Published by Globes, Israel business news – en.globes.co.il – on July 8, 2020
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