Israel had 6,673 active high-tech companies and startups as of the end of 2018, according to a report published by the Start-Up Nation Central organization.
The report confirms the assessment that artificial intelligence (AI) is the leading trend among startups, with 17% of all startups in Israel operating in this sub-sector. Israel had 1,150 AI companies at the end of 2018, compared with only 512 in 2014. It is possible, however, that some companies are portraying themselves as AI companies even if they use AI shelf products, rather than developing such technology themselves.
According to the report, AI companies raised $2.25 billion in 2018, up from $1.33 billion in 2017 and only $500 million in 2014. AI companies accounted for 37% of all the capital raised by startups last year.
Financing rounds on an uptrend
Israeli startups and hiogh-tech companies raised $6 billion in 681 financing rounds in 2018, 15% more than in 2017. The median round was $4 million, 33% higher than in 2017. There were 97 exits totaling $3.28 billion in 2018.
The report shows that the downtrend in the number of seed rounds is continuing: 268 deals in 2018, compared with a record 334 in 2015 and 288 in 2014. The number of A and B rounds in 2018, on the other hand, was higher than in 2017.
Investors: Fewer angels, more corporate funds
The report states that 430 investment concerns, of which 23 are foreign, have a regular presence in Israel. Investment by angel investors in terms of the number of deals continues to slide, while corporate funds are stepping up their activity. Israeli investment concerns participated in 60% of the financing rounds, US concerns in 43%, UK concerns 7%, German concerns 5%, Chinese concerns 4%, and Japanese concerns 3%.
The most prominent investors in the early stages were Israeli concerns, followed by the US, UK, Germany, and China. The order changed in the later stages, with the leading investment concerns being from the US, followed by Israel, China, the UK, and Japan.
49% of the buyers in exits deals were from the US and 30% from Israel. The rest, with 2-4% each, were from China, the Netherlands, the UK, Canada, France, Germany, and India. Both the values of the exits and the number of deals fell in 2018 to their lowest levels since 2014.
320 multinationals with 300 R&D centers
The report states that 320 multinationals operate in Israel, 300 of which have R&D centers spread among 360 offices. The number of new centers, which has declined consistently since 2015, when 46 new centers were opened, totaled 17 in 2018.
Most of the multinationals are from the US, followed by Germany and the UK. Israel also had 225 hubs at the end of 2018, including accelerators, shared workspaces, and programs for entrepreneurs. Five new workspaces were opened in 2018, compared with 17 in 2015-2017. The number of programs for entrepreneurs was halved from nine to five. The number of new corporate accelerators rose from 3-6 in 2014-2017 to seven in 2018.
80% of Israeli high-tech companies and startups are developing B2B products, while only 20% are developing products aimed at individual users (B2C). The number of B2C companies rose slightly, but by a lower rate than the increase in B2B companies.
Investments in B2C jumped in 2018, compared with 2017, but were still slightly below the record set in 2016, while the number of deals has been consistently falling: 149 in 2018, compared with a record 233 in 2015. Both the number of deals and the amounts invested in B2B companies have gone up almost every year since 2014.
The report also includes figures for the number of companies in the various stages of product development. 13% are still in the R&D stage, 21% are in the more advanced development stages, and two thirds have already launched a product.
55% of high-tech companies and startups have 1-10 employees, 30% have 11-50 employees, 10% have 51-100 employees and 5% have over 200 employees.
Published by Globes, Israel business news - en.globes.co.il - on March 11, 2019
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