Israeli startups raised $5.89 billion in the third quarter of 2021. This was 9% below the $6.5 billion raised by Israeli startups in the second quarter of 2021 but nevertheless, the second highest figure ever raised by startups in a quarter, according to the report compiled by IVC Research and the Meitar law firm.
Israeli startups have raised $17.8 billion since the start of 2021, up 71% from the corresponding nine months of 2020, and compared with $10 billion in all of 2020, which was itself a record year. Until 2021, Israeli startups had never raised more than $3 billion in a quarter, now the figure is averaging double that amount.
There was a certain slowdown in investment raised in the third quarter of 2021 compared with the second quarter and IVC-Meitar noted that this was the first time in five years that there was a decline, quarter-on-quarter, in the number of investment deals by growth companies (Series B financing rounds and onwards). In the third quarter, there were 'only' 105 growth round investment deals, compared with 134 in the second quarter and 115 in the first quarter.
There was also a fall in the number of mega-rounds, in which more than $100 million was raised. This has been the driving force behind the huge jump in startup investments in 2021. In the third quarter, there were 15 mega-rounds, compared with 18 in the second quarter and 20 in the first quarter.
The fall in mega-rounds comes as the Nasdaq tech market seems to have lost its momentum - falling 4% in September and the continued performance of the Wall Street market may dictate whether the contraction in investment raised by startups is a trend.
Despite concerns that early stage startups are losing out in investment funds to growth companies, IVC-Meitar data found that this is not the case. In the first nine months of 2021, startups raised $2.52 billion in 293 seed round and Series A round deals, an all-time record. In all of 2020 early stage startups raised $1.86 billion in 343 deals.
2021 has also been the first year in which the amount raised by Israeli tech companies has exceeded exits through acquisitions. In the first three quarters of 2021, Israeli companies raised $9.8 billion in IPOs (including SPAC mergers) compared with $7.6 billion in exits.
But IPOs by Israeli tech companies also slowed in the third quarter with 17 companies raising $1.36 billion compared with $2.4 billion in the second quarter. The declining trend was especially prominent with SPAC mergers. In the second quarter $2.4 billion was raised in six SPAC mergers while this figure fell to just $501 million from four SPAC mergers in the third quarter.
The IVC-Meitar report, which relates to Israeli companies, either registered in Israel or with management in Israel even though the company is incorporated abroad, was compiled by Advs. Mike Rimon, Shira Azran and Itay Frishman of the Meitar law firm and IVC research manager Marianna Shapira.
Published by Globes, Israel business news - en.globes.co.il - on October 13, 2021
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