Israeli High-Tech Raises $1.55b in First Quarter of 2019

New IVC-ZAG report says this was the most successful first quarter in the past six years, driven by two mega-deals of more than $100 million each.

By Brian Blum, ISRAEL21c

Israeli high-tech companies continue to attract significant investment: $1.55 billion in 128 deals was raised in the first quarter of 2019, according to a new report from Tel Aviv-based IVC Research Center and ZAG-S&W international commercial law firm.

That’s 28 percent more capital and 15 percent more deals compared with the same period in 2018, making this “the most successful first quarter in the past six years,” says Shmulik Zysman, managing director of ZAG-S&W.

The impressive numbers were driven by two mega-deals of over $100 million each: Innoviz, which makes LiDAR sensors for autonomous vehicles ($132 million) and cloud-based networking software maker DriveNets ($110 million). Those two investments captured 16% of the total money raised.

The latest figures continue a trend in the local high-tech industry where investment is shifting toward later-stage companies, typically in C rounds rather than seed or Series A financing. Israeli companies raised $475 million in 17 C round deals during the quarter – the highest figures since 2014.

By contrast, seed round amounts declined to $51 million, down slightly from Q1 2018 ($54 million) but a bigger drop from the last quarter of 2018 ($94 million). That said, the number of seed round deals (28) were in their historical quarterly ranges for the years 2014-2018.

Five companies raised more than $50 million each, pushing the median deal size to $6 million. In addition to Innoviz and DriveNets, that club included database maker Redis Labs ($60 million), Cato Networks, which specializes in software-defined wide-area networks ($55 million), and distributed storage vendor LightBits ($50 million).

Companies involved with artificial intelligence grew during the quarter, raising $599 million in 51 deals – almost double the Q1 2018 figures. IT remains the largest tech sector in Israel, raising $660 million in 57 deals. Life-science companies raised $260 million.

Not all deals involved venture capital. Non-VC-backed deals (those from other tech companies or from individual and angel investors) comprised $247 million in 57 deals. IVC says that these kinds of deals have been on the upswing over the past several years.

Approximately 60% of the quarter’s deals were made in investors’ current portfolios.

The latest IVC survey was based on reports from 431 investors, of which 60 were Israeli VC funds and 371 were what IVC described as “other entities.”