Israeli high-tech companies raised $2.24 billion in the third quarter of 2019, the highest quarterly amount since 2013, IVC Research Center - Zysman, Aharoni, Gayer & Co. (ZAG-S&W) reports. Israeli tech companies have now raised $6.14 billion in the first nine months of 2019. This figure is well on course to beat last year's record tech company fund raising, when according to IVC-ZAG, Israeli companies raised $6.4 billion, up from $5.24 billion in 2017
IVC-ZAG notes that the amount raised in the third quarter kept pace with amounts raised in the previous quarter, while deal numbers increased from 119 to 128.
As in previous quarters, in the third quarter of 2019, IVC Research Center noted a high number of large deals, each over $50 million. These 13 large deals attracted 57% of the total capital raised this quarter and included six deals of more than $100 million.
Adv. Shmulik Zysman, managing partner and high-tech industry leader at Zysman, Aharoni, Gayer & Co. (ZAG-S&W) said, "As a former athlete, I know that once you reach first place, the real difficulty is holding on to it. After seeing record-breaking numbers in the previous quarter, the third quarter even surpassed it, with this year's recruitment record breaking compared to every previous quarter. The record was recorded both for the Israeli funds whose total borrowing remains high and stable, and for the total capital, which climbed by 45% in the corresponding quarter last year and last quarter."
He added, "The data suggests that changing investor preferences may constitute a warning sign previously pointed out by us - 'less risky venture capital.' The proportion of total capital invested in early-stage companies relative to the total capital invested has been declining over the past year, with the lowest rate recorded this quarter. In contrast to the first three quarters of 2018, the total capital raising of early-stage companies in the first three quarters of 2019 has been relatively stable. Therefore, we have hope that this is not an unequivocal trend but only a warning sign."
As in previous quarters, the software sector continued to lead with almost $1.4 billion raised in 52 deals. This was due to 10 deals over $50 million each, which captured 73% of the total raised by software companies. Life sciences also attracted more capital in the third quarter, raising $350 million in 38 deals compared to $239 million in 29 deals in the third quarter of 2018. Capital raising by cleantech companies also grew in number of deals (10) and amounted to $85 million.
IVC Research Center research director Marianna Shapira said, "The increase in capital raising activity in Israel recorded during the first three quarters of 2019 is in line with the global trend in the high-tech industry. One notable trend expected to continue during the fourth quarter of this year is the rapid growth of fast-growing software companies, especially in the artificial intelligence and cyber verticals. According to IVC's data, over the last five years there has been a continuous increase in capital raising and exits in these technology verticals, and more than 70% of active companies are in sales stages. Moreover, even though there has been no increase in the capital raising in the early stages, IVC expects the rate of funding for these companies might increase in the last quarter of this year, in accord with the trend observed in previous years."
Published by Globes, Israel business news - en.globes.co.il - on October 29, 2019
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