Israeli high-tech closes 2021 with a new record in the recruitment of Israeli companies Which soared to $ 25.6 billion in 773 deals: a jump of 146% from the amount raised last year and a 28% increase in the number of deals * The fourth quarter of 2021 breaks a new record and reaches a total of about $ 8 billion in capital raising over 206 transactions
The Israeli high-tech industry sums up the year 2021 and continues its ascent: Capital raising in Israeli high-tech last year reached a new high with $ 25.6 billion raised in 773 transactions. This is a 146% increase in the amount raised last year as well as a 28% increase in the number of transactions in the industry. The last quarter of 2021 showed strong results of capital raising activity and reached a peak of $ 8 billion in 206 transactions, while in Q3, 170 raising transactions totaling $ 5.7 billion were executed.
Adv. Mike Rimon, a partner in the law firm Meitar notes Because 2021 was the year of the big bang in the offerings of Israeli companies in the United States. After years in which very few Israeli companies were issued in the United States, this year they were issued in the United States [ ] Israeli companies, most of them with very high values. This was made possible by the unusual tide in the world capital markets (which stemmed, among other things, from the US government’s financial incentive programs that caused cash surpluses that “sought” an investment channel and very low interest rates), maturity of excellent Israeli companies that have grown here in recent years. Of American investors in Israeli companies (encouraging IPOs in the US) and unprecedented growth of the technology industry worldwide (with an emphasis on the Corona period). We assume that the number of Israeli companies that will issue in the United States in 2022 will be smaller than the number in 2021, but there is no doubt that unlike in the past, an issue as an exit option has become very relevant to many Israeli companies.
At the same time, we expect continued significant activity in private capital raising as well as an increase in the number of mergers and acquisitions, given the large number of companies that have raised significant amounts in public offerings or private raising. “Israeli companies that have raised significant sums are interested in acquisitions of Israeli and foreign companies, a relatively new phenomenon that indicates the maturation of the ecosystem of Israeli technology companies.”
Guy Holtzman, CEO of IVC, Notes “Without a doubt, the year 2021 recorded records in the volume of capital that entered the Israeli high-tech market. Admittedly, there are aspects that need to be considered regarding the Israeli high-tech companies – they will have to prove their value and increase the volume of profit next year. Moreover, it seems that the Israeli high-tech market has reached a glass ceiling with about 9,500 companies active in the field, with multinational R&D centers and Israeli high-tech companies with resources continuing to attract more and more local manpower. “
There was also a significant increase in 2021 in financing early rounds – Pre-Seed and Seed – which attracted a significant amount totaling $ 3.7 billion, 97% more than in 2020, but only 14% of total capital in the past year. In addition, the raising in later rounds (Round C and above), constituted the majority of the capital raised in 2021 and attracted 65% of the total capital.
The IVC-String Lawyers report notes that in 2021 mega-transactions led the capital raising to record numbers with 155 transactions of over $ 50 million each totaling $ 18.93 billion, representing 74% of the total capital raised this year. This is a sharp increase compared to 2020-2019 with 39 and 47 such transactions, respectively. Also this year, 77 mega-transactions of over $ 100 million each were recorded, compared to 18 and 20 such transactions in 2019 and 2020, respectively. These huge deals totaled $ 14 billion – 55% of the total capital raised in 2021. The fourth quarter was particularly rich in mega-rounds, with 26 top deals raising 37% of the total capital raised this year in these deals.
Mariana Shapira, Senior Analyst at IVC, Details: “In 2021, a record number of Israeli high-tech companies were discovered that managed to raise capital from more than one round during a year: 65 high-tech companies compared to 40 companies and 25 companies in 2020 and 2019, respectively. These companies have attracted the most respectable capital sums this year; 10 notable companies have raised a total of $ 4.5 billion in aggregate from more than one round each (each round over $ 120 million). It seems that this phenomenon is becoming an expanding trend among Israeli high-tech companies, and causes the influence of investors’ preference for stable, expanding and well-known companies over the others in the Israeli high-tech market to be considered.
According to the report, the companies that benefited the most from capital investments in the past year operated in the cyber and fintech fields with 23 and 21 transactions that attracted record sums of more than $ 100 million per round, respectively. This is compared to 8 and 5 transactions of similar magnitude during 2020. The leading cyber security transactions were of Clarotti ($ 400 million) and Fireblocks ($ 310 million). Deel ($ 425 million) and Celsius Network ($ 400 million) overtook fintech fundraisers. A leading huge deal in the field of food tech was in Future Meat Technologies ($ 320 million).
The IVC-Meitar report also shows that in 2021, foreign investment soared with a record $ 18.64 billion, which accounted for 73% of the total capital raised. The number of investments by foreign and Israeli investors continued to increase in 2021, and the gap in the number of investments and amounts between the two groups – Israeli and foreign investors – continued to grow.
In terms of exits in Israeli high-tech, the report revealed that 2021 was a successful year with 238 transactions executed to the tune of $ 22.2 billion, without any extraordinary huge transactions (as happened in 2017 and 2019). When almost 50% of the exit revenues of 2021 were received from the initial public offerings.
Record sums raised over the past three years have contributed to low multipliers in mergers and acquisitions (the value of transactions divided by the total investment in the company) and marked modest potential returns on stock investments for investors in those years.
Revenue from merger transactions ranging from $ 100 million to $ 500 million reached 54% in 2021. The big change in M&A activity was in relatively small transactions – a range of $ 20-100 million – with 44 transactions during 2021, compared to a significantly lower number of transactions in this equal range between 2015 and 2020.
The Israeli stock exchange also arose in 2021, when 48 Israeli high-tech companies chose to make issues of an IPO on the Tel Aviv Stock Exchange, in addition to 23 IPOs on Wall Street and other foreign stock exchanges, which brings the total amounts from initial public offerings to more than $ 10 billion in 2021. In addition, although technology companies have recorded a significant correction in value since March 2021, the overall valuation of companies choosing to go public has been impressive. Three notable companies to note this year were Playtika valued at $ 13 billion, IronSource valued at $ 11 billion and SentinelOne valued at $ 9 billion.
2021 was also the year of the SPAC, in which 13 Israeli high-tech companies preferred to opt for SPAC issues in 2021 and raised $ 2.93 billion, with most of these companies seeing a significant contraction in their valuations.
Shira Azran, a partner in the Meitar law firm She added that “in these data we continue to see the impact of the corona on our lives. High-tech has gained momentum following the transition to digitization and cloud services in all areas, and with them cyber. Capital continues to flow to high-tech companies, and along with the continued growth of mature companies, we see two significant phenomena – an increase in the amount of lime rounds and capital invested in these rounds, and the presence of American funds from all stages in Israel. We expect this trend to continue until the end of the year and next year as well. ”