Israeli startups raised $1.52 billion in 181 deals in the first quarter of 2018, compared with $1.46 billion in 161 deals in the preceding quarter and $1.06 billion in 155 deals in the first quarter of 2017 IVC - Zysman, Aharoni, Gayer & Co. law firm (ZAG) reports.
The survey found that a third of the amount raised in the first quarter was invested in A financing rounds, while the volume of capital invested in research and development companies jumped 60% in comparison with the preceding quarter.
Two months ago, IVC published a provocative report saying, "The cybersecurity sector has been one of the strongest and most successful branches in Israeli high tech," but "good times always end, and several signs are already indicating that the cyber security sector faced a slight headwind in 2017."
IVC reached this conclusion because the number of new cybersecurity companies founded in Israel fell from 98 in 2015 to 73 in 2016 and 48 in 2017.
The current IVC report, however, found that this sector experienced what IVC calls a "new cyber wave." According to IVC, Israeli cyber security companies raised $328 million in 34 deals in the first quarter, compared with 18 deals in the preceding quarter, with most of the financing rounds coming in young companies in their seed and A rounds.
The Chinese are coming
Adv. Shmuel Zysman, who heads the Zysman, Aharoni, Gayer & Co.'s high-tech department, cites foreign investments in general and Chinese investments in particular as the key factor in the increase in investments.
Zysman says, "Israeli high-tech opened 2018 with a strong momentum - foreign VC fund’s investments almost doubled compared to the same quarter last year… we link the foreign investments increase to regulatory changes in China, which defined clear rules and recommendation for technology investments… There is a reason for optimism. In the past years, usually, the first quarter figures were weaker compared to other quarters of the same year, mostly in capital amounts. If judged by the numbers of Q1/2018, it looks like we might have an interesting and prolific year ahead of us."
IVC Research Center research director Marianna Shapira also cites the growth in foreign investments as a factor in the increased total number of investments. She says, "The first quarter of 2018 continued the upward trend in capital raising, while demonstrating a renewed growth in number of deals. This can be explained by the increase in VC-backed deals, by more foreign VC funds active in Israel and by Israeli VC funds making more first investments." Shapira adds, "In Q1/2018, IVC noticed a continuous course, started in Q4/2017 - an increase in first investments done by foreign corporate investors in Israeli high-tech companies. In addition, the beginning of 2018 was prolific for early stage companies, following a period of decline in capital inflow."
Fintech, IoT on the rise
An analysis of the deals and financing rounds according to sector shows that Israeli software companies continue to attract investors, raising $754 million in the first quarter, compared with $592 million in the fourth quarter and $411 million in the first quarter of 2017.
Israeli fintech companies raised $328 million in the first quarter, up 141%, compared with the first quarter of 2017. The number of deals by Internet of Things (IoT) companies continued to increase, with $265 million being raised in 29 deals. IVC says that this is the most raised in the past five years.
Published by Globes [online], Israel business news - www.globes-online.com - on May 7, 2018
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