At the current rate, the record set last year for total financing raised by Israeli startups will at least be equaled this year. A "Globes" survey shows that 81 startups raised $1.02 billion (NIS 4 billion) in the first quarter of 2016, compared with $4.4 billion in all of 2015. In other words, last year's pace has been more or less maintained. For the sake of comparison and showing just how much of a boom we are in, only three years ago, in 2012, a total of $1.8 billion was raised in the entire year, according to IVC figures.
In view of the first quarter just finished, we have chosen to analyze in depth the financing figures, and here are some of the findings:
This is the average amount raised per company, which is neither particularly high nor particularly low. It is more or less the amount that enables a research and development company to continue operating for another 12-18 months. 51 companies, 63% of the total, raised less than $13 million each.
This is the proportion of biomed companies, i.e. the ones developing medical equipment, drugs, or any other medical solution. This means that most of the capital available for investments is going into the pockets of technology companies, which, regardless of what they are developing, have much lower risk profiles than biomed companies. The chances of a cancer drug, for example, passing clinical trials and getting US Food and Drug Administration (FDA) approval are far lower than the chances of the market smiling on some cloud computing solution. This figure is reflected in the total raised accounted for by biomed companies: $191 million, 19% of the total.
This is the proportion of companies that raised over $50 million per company - only four companies. 84% of the companies, on the other hand, raised up to $25 million per company. This means that the number of more mature companies able to raise more money per round is significantly smaller than the companies in the research and development stages and making only initial revenue. Actually only one of the companies that raised money in 2015 is already classified as a unicorn - a term referring to companies with a value of over $1 billion - ForeScout Technologies, a company that provides cyber security solutions for the Internet of Things.
This is the proportion of the total amount raised by the four companies that raised over $50 million each, meaning that 5% of the companies were responsible for 22% of the amount raised. In other words, a very small proportion of startups get a substantial share of the amount invested by the venture capital and investment funds. Half of the amount raised, on the other hand, was by companies that raised up to $25 million apiece.
This is the proportion of the companies that raised money in 2015 in the cybersecurity niche, one of the hottest in both the Israeli and global high-tech industry. 10 companies raised a total of $149 million, 15% of the total raised, and 18% of the amount raised by technology companies (excluding biomed companies). It is very reasonable to assume that at least one of these will make an exit in the next 12-18 months. That is how it goes in the high-tech industry: a company is sold long before it proves itself commercially.
To sum up the first quarter of the year, high-tech is not downshifting.
Published by Globes [online], Israel business news - www.globes-online.com - on April 6, 2016
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