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Investor activity is showing that the tech scene in Israel is hotter than ever. Figures from IVC Research Center and accounting firm KPMG Somekh Chaikin indicated that 2016 set the all-time fundraising record for Israeli high tech. Last year’s total climbed to $4.8 billion, exceeding the 2015 figures by 11 percent, The startups of Israel raised $3.8 billion in investment money in the first nine months of 2016, a 27 percent increase over the first nine months of 2015.
There’s more to this growth than meets the eye.
Despite the increase in total investment, 2016 saw fewer deals than previous years. For example, only 142 funding deals closed in Q3’16, a 26 percent drop from the 193 deals in Q2, 17 percent less than the trailing three-year quarterly average (171 rounds per quarter).
So the grand total of funds is rising, but the number of deals is going down. In other words, investors are putting more money into each deal, so each company raises more money, and the figures bear that out. The average Israeli funding round reached $7 million in the first nine months of 2016, a 9 percent increase over the $6.4 million average in the first nine months of 2015. And the trend is to invest at later stages — C round or later.
The late stage financing went from $1.3 billion in 2014 to $2.2 billion in 2015, and the average time to exit for startups increased from 6 to 7 years in 2015. Financing in late stages also accounted for the lion’s share of funding in 2016, representing 60 percent of the total funds.
This trend indicates a sea change in the Israeli startup ecosystem.
While in the past Israeli startups were satisfied to raise seed money and ecstatic to get as far as an A round – because it gave them more time to shop around their technology looking for an acquisition by Google, Microsoft, or other major tech corporation – they are now holding out. Startups are seeking to build the value of the company, aiming for a massive exit or a high-flying IPO. It’s a sign that entrepreneurs are more confident…