September’s Record Fundraising of $1.2B Shows Continued Strength of Israeli Startups
Companies on pace for top-ever year of capital investment despite the pandemic
Israeli startups appear to be immune from the coronavirus slowdown, with some sectors getting a boost from the global health emergency, tech watchers tell The Media Line.
September’s record-smashing $1.2 billion in new equity, the first time that more than a billion dollars was raised in a single month according to Start-Up Nation Central’s Finder database, demonstrates the force of Israel’s entrepreneurship ecosystem.
“In Israel I feel like we’re always in survival mode,” Hillel Fuld, tech blogger and startup adviser, told The Media Line. “So, when there is a global crisis, we don’t necessarily buckle under the pressure like many other places. We thrive under the pressure and we flourish.”
The total haul of $7.2 billion for Israeli startups through the first three quarters of 2020 is already nearing last year’s record total of $7.6 billion, Start-Up Nation Central’s research shows. Even at the low point of the COVID-19 outbreak in May, $421 million was raised.
Meir Valman, director of research at Start-Up Nation Central, told The Media Line that by the end of May and beginning of June, they started to see investors getting back into the game.
“Investors globally are coming back full speed now. If you speak to investors, you listen to what is going on in investing conferences, they are very active today,” Valman said. “They seem to be not holding back because of the pandemic anymore.”
Valman said that roughly 85% of the money invested in Israeli startups comes from abroad – international venture capital firms or funds mostly from the United States but also some from Europe and Asia.
“The money comes from venture capital funds,” Lior Green, a business analyst for Steele Compliance Solutions and a researcher for Explorium, told The Media Line. “The American fund Insight Partners has in recent years become the most significant player in Israeli high-tech and has significant holdings in a number of unicorns.”
“Unicorn” is a term used to indicate a privately held startup company valued at more than $1 billion.
Insight Partners announced in October of last year the opening of its first international office in Tel Aviv. In the statement, founder Jeff Horing praised Israel’s “advanced tech ecosystems” and “thriving R&D community,” saying the New York-based venture capital and private equity firm was “committed to bringing our software expertise to Israel’s vibrant, innovative environment, and partnering with the next generation of category winners.”
According to Start-Up Nation Central, Insight Partners has $20 billion of assets under management and has invested in 27 Israeli companies, including repository and distribution platform JFrog (NASDAQ: FROG), which went public in September with an IPO of $509 million. Insight Partners was one of seven investors in September’s $40 million B Round funding for workforce management platform Papaya Global and one of three investors in September’s $25 million B Round funding for automated network penetration testing platform Pcysys.
While September set a record for fundraising, the number of rounds was low at 49, compared to the January 2018 peak of 119 rounds, according to the Start-Up Nation Finder.
The equity raised by Israeli startups last month was mostly concentrated in a relatively small number of companies: Next Insurance, an online insurance provider for small businesses, raised $250 million; Snyk, a cybersecurity business, raised $200 million; and Melio, a company that facilitates digital payments between small businesses, raised $80 million.
“Melio’s fundraising enables it to accelerate growth and reach more customers. It will also support the company’s plans to provide B2B [business-to-business] payment capabilities to third parties, mirroring the development the tech industry has seen with B2C [business-to-consumer] payments,” Melio said in a statement emailed to The Media Line.
In Israel I feel like we’re always in survival mode. So, when there is a global crisis, we don’t necessarily buckle under the pressure like many other places. We thrive under the pressure and we flourish
Pain response monitoring company Medasense Biometrics raised $18 million in its Series C funding round, a process that began more than a year and a half ago, the company’s founder and CEO Galit Zuckerman-Stark told The Media Line.
“The pandemic slowed the final stages, but once the company showed that its offering also has the potential to help COVID-19 patients, opportunity outweighed the risks and allowed continuation of the fundraising, enabling us to close this round successfully,” Zuckerman-Stark said.
Cybersecurity is the leading Israeli sector in 2020 so far, with $1.7 billion raised from 417 companies in 64 rounds. Fintech, smart mobility and digital health care are other sectors raising a lot of money this year, according to the Start-Up Nation Finder.
“Travel isn’t doing too well right now,” Fuld said, adding that “remote work or anything that has to do with remote work is doing incredibly well.”
Green said that biotech companies have become a hot commodity on the market because of the growing awareness of biological threats.
Information technology company DeepCube raised $7 million in September. Co-founder and chief technology officer Dr. Eli David told The Media Line he is optimistic that Israeli startups will continue to be major players during the coronavirus pandemic and are well-positioned to become global leaders in the new reality.
“The Israeli tech and health sectors will continue to drive the new digital age resulting from the coronavirus pandemic and shape the post-pandemic era,” David said.
“Israeli startups are very agile, flexible and lean; this allows Israeli companies to adapt faster to economic instability and changes,” Zuckerman-Stark said. “We believe that this combination of being very flexible, adaptive, professional and eager to succeed will allow Israeli startup companies to move forward and continue to deliver record-breaking trends.”