The country's high-tech companies are heading for another record year, IVC-ZAG reports.
Israeli high-tech companies raised $2.32 billion in the second quarter of 2019, the highest quarterly amount since 2013, IVC - ZAG reports. This brings to $3.9 billion the amount raised during the first half of 2019 - an all-time record. The number of deals was only slightly above the 242 deals recorded in the first half of 2018.
The second quarter figure in 2019 was boosted by 10 mega deals (each over $50 million), totaling $1.26 billion and accounting for 54% of the capital raised in the second quarter of 2019. The large transactions included two exceptional deals: a PIPE (Private Investment in Public Equity) round of $186 million raised by Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT), and $110 million raised by Cellebrite Mobile, post-acquisition by Sun Corp. The median deal amount for the second quarter was $5.5 million, compared with $5 million in the corresponding quarter last year and $6 million in the first quarter of 2019.
The three largest second quarter deals totaled $670 million: Lemonade raised $300 million; Monday raised $250 million; and Sentinel Labs raised $120 million
IVC's found that in the second quarter of 2019, venture capital-backed deals were worth a record of $1.81 billion in 73 deals. Venture capital-backed deals accounted for 78% of the amount raised in the second quarter, and an even higher percentage of the $1.34 billion raised in 75 deals in the first quarter of 2019. Analyzing the distribution of venture capital-backed deals, IVC found that the amount raised by revenue growth companies in venture capital-backed deals grew dramatically to $1.12 billion.
In the first half of 2019, venture capital-backed deals accounted for $3.16 billion in 148 deals, and almost doubled the amount raised in the first half of 2018 - $1.86 billion in 142 deals.
ZAG-S&W (Zysman, Aharoni, Gayer & Co). managing partner Adv. Shmulik Zysman, said, "Just when we thought the investment growth in the first quarter of 2019 had broken every record, along comes the second quarter and registers the most significant leap in the total amount raised in the last six years. Indeed, the second quarter of this year recorded the most significant leap ever in the total amount raised- $757 million, compared to the previous quarter, indicating a quarterly record and in accordance record high in the first half of 2019, unprecedented in recent years."
Zysman added, "Late-stage companies raised record amounts in this quarter, and there was a degree of stability among early stage investments. On the other hand, the situation of mid-stage companies seems less favorable: funding in this quarter was lower than in recent years."
Capital raising by stage and round
In the second quarter of 2019, deals larger than $20 million dominated capital raising activity, with $1.79 billion in 29 deals compared with $932 million in 18 deals in the corresponding period of 2018. This marks the highest sum and number of deals for this category since 2013. Deals exceeding $20 million totaled $2.78 billion in 53 transactions in the first half of 2019. Deals exceeding $50 million during this period accounted for $1.7 billion in 15 deals, compared with $920 million in nine deals in the corresponding period of 2018. In the second quarter of 2019, Israeli life sciences companies raised $263 million in 27 deals. Both the number of deals and the amount raised were slightly higher compared with the quarterly average since 2013.
Foreign investors increased activity in the second quarter of 2019 compared with previous quarters, making 441 investments totaling $1.57 billion.
IVC Research Center research director Marianna Shapira said, "The second quarter of 2019 continues the same trend from recent quarters. Israeli high-tech companies are gaining access to a larger pool of capital for growth companies, especially from foreign investors. This shows growing appetite for the local market. The trend is driving valuations to new heights, presenting challenges both to the companies seeking capital and to local investors. The second quarter figures show that most early-stage companies are struggling to access investment capital. This discrepancy might be a cause for concern about the future of seed ventures in Israel. If the second half of 2019 continues with the same pace, this year will break previous records for capital volume."
Israeli high-tech growth stage companies (companies in initial revenue and revenue growth stages) were exceptionally active in the second quarter of 2019. These companies raised $2.02 billion in 70 deals - the highest total amount since 2013. IVC noted that late financing rounds accounted for $1.12 billion in 23 deals in the second quarter of 2019 - nearly three times the $414 million raised in the second quarter of 2018.