The biggest trend of 2019 in Israel’s tech industry has been a substantial increase in later-stage funding, which jumped from $3.45 billion in 2018 to $5.24 billion year to date. This is an increase of 52% after somewhat stagnating during the prior three years.
This has had a huge effect on total fundraising, but most importantly has allowed a large number of Israeli tech companies to keep growing without needing to be acquired or raise money on the public markets.
There have been 15 mega rounds (of $100 million or greater) in 2019 so far, compared to only four in 2018. The largest financing rounds of 2019 were raised by InsurTech companies Lemonade ($300 million, D round) and Next Insurance ($250 million, C round), followed by an E round of $200 million raised by cybersecurity startup Cybereason.
These are Israel’s largest financing rounds of 2019:
|Company||Sector||Amount ($M) |
|Lemonade||Fintech and eCommerce||300 (D round)|
|Next Insurance||Fintech and eCommerce||250 (C)|
|Cybereason||Security and Safety Technologies||200 (E)|
|Fundbox||Fintech and eCommerce||176 (C)|
|Riskified||Fintech and eCommerce||165 (E)|
|Monday.com||Software Applications||150 (D)|
|Lightricks||Software Applications||135 (C)|
|Innoviz||Industrial Technologies||132 (C)|
|SentinelOne||Security and Safety Technologies||120 (D)|
|Fabric||Industrial Technologies||110 (B)|
|Drivenets||Mobile and Telecom Technologies||110 (A)|
|Vayyar||Industrial Technologies||109 (D)|
|BlueVine||Fintech and eCommerce||103 (F)|
|Trax||Enterprise Solutions||100 (D)|
|Rapyd Financial||Fintech and eCommerce||100 (C)|
Of these 15 rounds, six were for FinTech companies (including InsurTech companies Lemonade and Next Insurance). Three investments went into industrial technologies (Vayyar, Innoviz, and Fabric), and two each for mobile and telecom, safety and security and software applications.
Investors in these mega rounds were diverse but dominated by foreign VCs, with General Catalyst participating in three of these rounds, followed by Softbank, Bessemer Partners, Insight Partners and HarbourVest with two each. Israeli investors ClalTech, Vintage Investment Partners and Ion Crossover Partners also invested in two each.
Globally, there have been 442 VC rounds of $100 million and over in 2019, the highest number ever, according to Pitchbook. This is reflective of the record amounts of capital allocated to VC, the increase in later stage funds and the need for this capital to be invested.
We can also see the increase in later stage round size more generally. The median round size at later stages increased from $18.25 million in 2018 to $26 million in 2019, an increase of over 40%. C rounds and later saw the greatest increase, rising from a median of $25 million in 2018 to $39 million – a 56% increase.
From Startup Nation to Scaleup Nation
One of the main implications of this is that even startups based in Israel can raise substantial C rounds and beyond, and are not forced to sell, or move locations after their B round or earlier as frequently occurred in the past. This partially explains why the value of exits has declined despite the continued boom in the sector: mergers and acquisitions have declined from a peak of $7 billion in 2017 to $4.3 billion in 2019, as companies opt to raise more capital, grow and stay private rather than look to be acquired.
Evidence suggests that raising these kinds of large rounds is generally positive for startups. A recent study by Pitchbook showed that US startups that raised Series A or B rounds of $100 million or more were more successful in raising subsequent rounds and they were far more likely to go public than their lesser-funded peers. Companies that raised mega-rounds in their early years were more likely to achieve any kind of exit, and did so about a year earlier than other startups.