Israeli tech cos raise record $4.5b in Jan-Sep 2018

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The third quarter continued the downtrend in deal numbers and the upturn in amount raised per deal.

Israeli high-tech companies raised $1.55 billion in 131 financing rounds in the third quarter of 2018, according to a quarterly report on high-tech financing rounds by IVC and ZAG. This is a slight decline in comparison with the $1.65 billion raised in the second quarter and the $1.6 billion raised in the third quarter of 2017. $4.54 billion was raised in 444 rounds in the first three quarters of 2018, the most ever raised in Israeli high tech during a nine-month period.

The third quarter continued the downtrend in the number of deals and the upturn in the average amount raised per deal. The 131 rounds were fewer than the 156 rounds held in the second quarter and the 152 rounds in the third quarter last year. The average amount raised per round in the third quarter was nearly $12 million, compared with $10.7 million in both the preceding quarter and the corresponding quarter last year.

In line with the market trend in recent years and the corresponding trend in the US, seed rounds again declined in the third quarter. In general, investors are focusing on later rounds and investing more in each round. $1.1 billion of the total amount raised in the quarter was raised in 26 rounds of $20 million or more, compared with 19 rounds in the preceding quarter and 22 rounds in the corresponding quarter last year.

The trend is also related to the increase in number of investments in mature companies already posting revenue and the fall in the number of investments in early-stage companies. Mature companies have raised $1.3 billion in 79 rounds this year, while early-stage companies raised only $235 million in 52 rounds.

Software companies raised a peak of $760 million, including 12 deals of over $20 million each. New software companies, however, had difficulty raising money, with only 17 deals in the early stages. Artificial intelligence companies accounted for 17 rounds of over $20 million each.

The number and type of investors have also changed in recent years, with a significant change in the third quarter. The number of rounds in which venture capital funds invested fell from 83 in the second quarter and 102 in the third quarter of 2017 to 67 in the third quarter this year. At the same time, investments by venture capital funds totaled $1.3 billion in the third quarter, compared with $900 million in the preceding quarter and $1.3 billion in the corresponding quarter last year, indicating that venture capital funds are making larger deals. The number of investors per round continues to rise: 4.2 investors per round in the third quarter, compared with 2.5 investors per round in 2013.

The Israeli venture capital funds reduced their activity in the third quarter, with only 33 initial investments and 107 follow-on investments, compared with 115 initial investments and 145 follow-on investments in the preceding quarter and 106 initial investments and 175 follow-on investments in the third quarter of 2017. In contrast, corporate funds invested a record $223 million in the third quarter, compared with $100 million in the second quarter and $151 million in the third quarter last year.

Published by Globes, Israel business news - en.globes.co.il - on October 29, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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fund raising  image: Shutterstock
fund raising image: Shutterstock
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