Tech employees earned $2.2b in secondary deals in H1 2021

Melio employees Photo: Personal picture

The State of Israel will enjoy a tax windfall of $700 million from the share options of startup employees and entrepreneurs.

As fund raising by Israeli tech companies reaches new heights, thousands of Israeli employees were able to put money in their pockets in the first half of 2021 totaling $2.2 billion, before tax, "Globes" research has found. The state will enjoy a tax windfall of $700 million or NIS 2.3 billion. According to IVC-Meitar, Israeli privately-held tech companies raised nearly $12 billion in the first half of 2021 including such large companies as Transmit Security, Melio, Wiz, and Trax.

New records in fund raising, which are broken every quarter, have created thousands of new wealthy Israelis. These are not IPOs where employees receive money as soon as the offering is closed but rather the acquisition of a startup's shares by investment funds like Insight Partners, Tiger Global and SoftBank, and which provide a type of exit for senior employees and entrepreneurs while the company remains privately-held. This is done in order to strengthen the loyalty of employees to their companies and prevent them leaving for another company, in a very competitive market.

The absolute majority of high-tech companies in which secondary rounds are conducted are fast growth companies - B round and beyond. In the second quarter of 2021 alone, these mature companies raised $5.48 billion - the highest ever figure for this segment of the Israeli market. The first quarter ha also broken all records with $4.66 billion, more than double the $2 billion raised in the first quarter of 2020.

The huge investments in growth companies stem from traditional investors who have decided to divert more capital into tech companies in the coronavirus era and the low returns on bonds and interest rate, which is encouraging institutional investors to seek higher growth options. The growing shortage of tech employees is persuading more and more employees to put capital invested into options that employees can buy as shares. While in previous years, money raised would end up in the company's coffers and only a small amount in the employees and entrepreneurs pockets, today one third of the capital raised is for buying shares from senior employees and entrepreneurs in secondary deals.

The most impressive figure of all was the amount of capital raised in flotations on Wall Street and in Tel Aviv. The total value of Israeli companies, which raised money on stock markets, including ironSource, Payoneer, Innovid, SentinelOne and monday.com amounted to $62 billion, compared with just $8.3 billion in all of 2020.

Of the 48 public offerings which raised an overall $8.42 billion in the first half of 2021, seven were accomplished through a SPAC merger in which an overall $2.41 billion was raised. The Tel Aviv Stock Exchange (TASE) saw the largest number of flotations with 35 tech IPOs with 12% of the overall capital raised by Israeli tech companies in the first half of 2021.

Published by Globes, Israel business news - en.globes.co.il - on July 15, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Melio employees Photo: Personal picture
Melio employees Photo: Personal picture
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