If towards the end of the first quarter of 2020 and the beginning of the second quarter, someone would come and tell us that in the summary of the year the number of transactions in Israeli high-tech will increase by 14% compared to the previous year and the invested capital will increase by 27%.
The reason? Who does not remember the repressive and depressing sentiment that prevailed then in the markets and in the public atmosphere in general, where the general feeling was that the sky was falling on us, when every cough or sneeze was a gloomy sign of infection with the mysterious virus. So this sense of filth was replaced by the craze of bond raising by corporations around the world and then the trend, backed by zero interest rates, trickled down to the IPO market, which is just boiling from summer.
The reason for the change is simple. We began to understand the virus better and realized that the sky might be gloomy, but the world, literally, would not be destroyed and would not be destroyed. What happened in the financial markets is not at all detached from the Israeli high-tech market, which is umbilically linked to the Nasdaq index – the high exposure of Israeli companies to the index, among other things, affects the strength of the shekel against the dollar.
In general, there is hardly an Israeli technology company that has not examined or is considering an IPO in the American technology index, and those who are not in the process of examining, are already there. If you ignore the first rounds of recruitment for a moment, then the Nasdaq is the real benchmark of every Israeli startup. It is a standard mark. And in a world where visibility is everything, it is impossible not to want to be there. The better news is that, without a vow, 2021 will rise even About 2020.
2020 has been great for high-tech, but not everything is rosy
So what emerges from the report by IVC and the law firm Meitar, which has been monitoring the Israeli high-tech sector for about a decade? Quite simply, the companies reached record highs – both in venture capital and in the stock markets. In total, there were 578 transactions with a total investment of about $ 9.9 billion. In absolute terms, this is a 14% growth in the number of transactions and a 27% growth in the capital invested compared to last year.
In addition, 2020 was also a record year for capital raising for Israeli technology companies traded on the stock exchange, with 121 companies raising $ 6.55 billion, compared to 68 companies raising $ 1.95 billion in 2019. During 2020, 18 technology companies made initial public offerings (IPOs) in the capital markets in Israel and around the world, totaling approximately $ 1.6 billion.
However, 2020 ends with a sharp decline in mergers and acquisitions (M&A). Only $ 7.8 billion in 93 deals, compared to $ 14.24 billion in 143 deals in 2019.
These figures exclude transactions of over $ 5 billion. It is not pleasant to say – but not really – that in Meitar, the firm conducting the survey is a little less satisfied with the last line. Just due to the fact that this is a very profitable department for any law firm that deals with it and Meitar has one of the largest departments in the field, which has undoubtedly hit them in the bottom line.
As for the capital raising in which venture capital funds participated (out of all investments), in 2020 these funds participated in 371 transactions with a total investment of $ 8.74 billion. This is an increase in the number of transactions and in the total investment of venture capital funds compared to the past year.
Investments in Seed + A Rounds experienced a decline during the first and second quarters of 2020, due to market uncertainty in light of the corona crisis. “This trend changed later in the year and in the third and fourth quarters we experienced a jump in venture capital fund investments in terms of amounts and number of transactions,” the report’s authors wrote.
According to the authors of the report, Shira Azran, Mike Rimon and Itai FrishmanPartners in Meitar: “While in 2020, especially in light of the Corona epidemic, we saw a significant decrease in the activity of mergers and acquisitions of Israeli companies, at the same time there was a significant increase in capital raising by Israeli and foreign investors, both in the number of transactions and the accumulated capital invested.
“Specifically, the number of recruitments of companies in growth stages has increased significantly as well as the total amount of recruitments, which indicates the continued maturation and maturity of the Israeli high-tech world, which is reflected, among other things, in the number of companies crossing the billion dollar mark.”
Guy Holtzman, CEO of IVC Noted that “2020 is an excellent example of why an in-depth analysis from several angles is required in order to understand Israeli high-tech activity. The first comprehensive report on the high-tech industry in Israel, which combines data on corporate recruitment, exits and activity in public capital markets, provides the necessary “To.
“The report is the result of a strategic collaboration between IVC and Meitar, using information received from investors in Israel, and is another step in making IVC a leading source of information in an industry that increasingly relies on data.
“We estimate that after a challenging but very successful year for Israeli start-ups, Israeli high-tech will continue to be a source of attraction for leading international, financial and strategic players.
“In the past year, the activity of foreign investors in Israel has increased significantly, leading to a jump in the volume of capital reached by young and mature companies. In the face of financial challenges in the industry, we will see Israeli institutional investors increase their involvement in the field and help local companies reach new heights.”
Simultaneously with the publication of IVC’s report, the accounting and consulting firm PwC Israel published its high-tech investment report. According to the report, there was a significant decrease in the number of transactions this year (60 compared to 80 in the previous year), But these amounted to a combined value of no less than $ 15.4 billion, compared to $ 9.9 billion last year, a record year since the publication of this report. The data consolidate all high-tech transaction activity.
According to the report, there was an increase in the total value of transactions compared to a decrease in their number compared to last year – in 2020 there was an increase of about 55% in the value of exits, with a total of $ 15.4 billion compared to $ 9.9 billion in 2019 (and about $ 17.1 billion if Consider transactions that were excluded from the study following a previous IPO (Forescout and Taldor). This amount is a record since the publication of this report – higher than the previous record amount recorded in 2014, when Mobileye was issued.
The increase was also reflected in the average value per transaction – a record number of $ 257 million on average per transaction, which is a growth of about 207% from the previous year. This is in light of a 25% decrease in the number of transactions (over $ 10 million): 60 transactions took place in 2020, compared to the previous year in which 80 transactions took place.
2020 is a record year in terms of issues, with no less than 19 issues (compared to 13 issues in 2019), led by the US issues of Frog Lemonade and Nanox. There is also a significant increase in issues on the local stock exchange, with no less than Nine IPO deals by high-tech companies, led by IPOs and Aquarius Engines. The value of the IPOs has risen meteorically, with $ 9.2 billion this year compared to $ 2.1 billion in 2019. The average IPO value also climbed from $ 169 million a year Previous to $ 489 million in the current year.
In 2020, there were 6 significant transactions (over $ 500 million) totaling $ 9.4 billion, compared to the previous year where only 4 such transactions totaled $ 3.7 billion. At the same time, the share of trades between $ 10M-50M continues this year to lead with 40%.
The computer and software sector for corporations continues to lead in the total number of transactions (approximately $ 7.4 billion) and even to grow significantly compared to 2019. A significant increase was also recorded in the Internet and life sciences sectors.
According to Yaron Wiesenblit, partner and head of the high-tech department at PwC, “If in recent years we have become accustomed to a diverse mix of a wide range of companies seeking to acquire Israeli companies and technologies, it seems that this year many of them froze and remained mainly with significant players in Israel. These forces faced the power of Israeli high-tech.
“The plot coefficient that this period created in refining the need for deep technologies and advanced computer and software solutions, along with mature and experienced entrepreneurs and executives, led at the end of the day to an impressive result at any scale. A more accurate resolution only sharpens the resilience and rapid responsiveness of the local high-tech industry, so while in the first half of the year, the number of transactions stood at 26, this accelerated in the second half during which 34 transactions took place, 16 of which went public.
“Undoubtedly, the main story of this year is the return of Israeli high-tech companies to the public domain through their issuance to the public. The summary of 2020 would probably have ended completely differently had it not been for the significant increase in the number and value of Israeli technology companies in the US and Israel. Thus, in the current year, no less than 19 issues were recorded, compared with 13 issues in 2019, when the value and the relative share of the issues in the total aggregate value of all transactions increased significantly. The return of technology companies to the forefront of the public stage is often explained by: low interest rates, increasing the amount of money, encouraging investments, inciting capital in the direction of technology companies, psychological need and perhaps even changing perceptions in the Israeli capital market. , But there is no doubt that the Israeli entrepreneurs did not miss the invitations. The result was not long in coming and perhaps even accelerated processes that in a normative reality would have lasted over a longer period.
“Although it is too early to talk in terms of the end of the crisis and despite the impressive data many high-tech companies have experienced and still experience challenges and difficulties, it is very possible that we can start thinking carefully in terms of the beginning of the epidemic. The consequences and effects of the crisis will remain with us for many years.” It may become a regular and integral part of our daily routine, but one thing is undisputed and that is that technology in its various derivatives, an important and vital role that will intensify. They will all be an excellent mix for the continuation of the positive trend. The resurgence of the stock market in Israel, along with significant issues of Israeli companies expected in 2021 in the US, as well as increasing use of SPACs, will continue to provide impressive data next year, but perhaps more importantly. “It is important for the development stage in the local high-tech market, where the financing and value-added options at significant values are more diverse and allow companies a long-term independent path.”