IVC-ZAG: Israeli startup raising up 28% in Q1 2019

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Israeli startups raised $1.55 billion in 128 deals in the first quarter of 2019.

Israeli startups raised $1.55 billion in 128 deals in the first quarter of 2019, IVC - ZAG S&W reports, up 28% in terms of capital from the first quarter of 2018 and 15% in the number of deals.

There were five very large financing deals over $50 million in the first quarter of 2019, two of which were larger than $100 million each: Innoviz ($132 million) and DriveNets ($110 million). These two mega-deals captured 16% of capital raised in the first quarter of 2019.

IVC-ZAG notes that in the first quarter of 2019 seed rounds fell to $51 million compared with $94 million and $54 million in the preceding and corresponding quarters respectively.

According to IVC’s analysis, while amounts raised in later round deals dropped to nearly $206m in 17 deals in the first quarter of 2019, C round deals soared, raising $476 million in 17 deals - the highest figures in both deals and amounts of the past four years. Capital-raising in deals larger than $20 million attracted 64% of the total in the first quarter of 2019.

ZAG-S&W founder and managing director Shmulik Zysman said, "Israeli high-tech opened the year 2019 with momentum. We are particularly optimistic as the first quarter of 2019 was the most successful first quarter in the past six years, both in terms of total funding and number of transactions. Another reason for optimism is the high involvement of venture capital funds in the amount of capital invested - one of the highest in the last five years".

He added, "In the first quarter we have seen the continued trend of "less venturous venture capital". This trend is evident in the increase of the amount of capital invested in mid and late stage companies. This contrasts with a certain decline in the capital amount invested in seed and early stage companies".

Capital raising by deal type Seventy-one venture capital-backed deals attracted more capital, reaching $1.3 billion in the first quarter of 2019. The number of venture capital-backed deals in the first quarter was lower than the unusually high venture capital fund activity in the fourth quarter of 2018, but higher than the quarterly average of 2014-2018. Non-venture capital-backed deals raised $247 million in 57 deals, which reflects the continuing uptrend in non-venture capital-backed deals. Venture capital-backed and non-venture capital-backed deals kept their traditional shares in the first quarter of 2019, 56% and 44%, respectively, out of the total number of deals.

Capital raising by leading sectors and technology verticals

In the first quarter of 2019, IT and software companies, the largest sector in the Israeli technology market, raised $660 million in 57 deals. The communications sector saw one outstanding deal - DriveNets raised $110 million - which was responsible for the increase in the capital amount this quarter.

The life sciences sector kept up stable activity in the first quarter of 2019, with the same number of deals as in 2014-2018. Life sciences companies raised $260 million, lower than the $315 million in the fourth quarter of 2018, but slightly higher than the historical average for this sector.

IVC Research Center research director Marianna Shapira said, "Capital raising activity continued to be high, especially in artificial intelligence and big data, raising mid-size amounts ($5 million to $20 million) in A to C round series. This stems from strong follow-on investment activity - approximately 60% of the deals were made in investors' current portfolio (a growth from about 50% quarterly average in previous years). Investors mostly concentrated on cultivating their portfolio companies, and mid-stage companies which attracted 43% of total capital inflow in the first quarter of 2019."

AI (Artificial Intelligence) companies continued the uptrend with a record 51 companies raising $599 million in the first quarter of 2019, compared with $369 million raised by 30 AI companies in the first quarter of 2018. Most of the investments were made in early stage financing rounds (seed + A rounds).

Other tech verticals such as cybersecurity and fintech kept average levels of activity during the first quarter of 2019.

Published by Globes, Israel business news - en.globes.co.il - on April 16, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

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