February, 2020 – Israel – Granot-Speiser

The year of 2019 was another good year for the Israeli high-tech industry in terms of capital raising. An in-depth review of the transactions taking place in 2019 shows prevalent trends – in terms of valuations, legal rights granted to investors and manner of financing – that demonstrate a continuing change in the flavors of the market and a certain maturity of the high-tech industry in Israel.

There is a known tendency of the Israeli startups towards the adoption of American companies’ practices, though always in some delay in respect to the Silicone Valley. This is a result of some similarities in perception of risks in investments and free & creative spirit that are common to Israel and the Silicone Valley, and is also backed up by long going readiness of US companies and venture capital funds to invest in Israeli start-ups.

Recent survey conducted in Israel on over 500 private high-tech companies, showed the following:

• the pre-money valuation (PMV) of the company in round C is much greater valuated, in significant gap, comparing to earlier rounds (pre seed, seed, A and B). there is a leap in the valuation of the company at round C;
• the Israeli founders are giving up more of their holding percentage if compared to US founders in each round;
• there is a gradual increase in the PMV of Israeli startups and prices of start-ups are going up;
• there is an ongoing increasing rate of companies that are not willing to sell the company, and more and more startups are rejecting purchase offers, as they want to continue developing their technology & products and develop mature and stable companies.

Looking at all of these trends above, it seems that the Israeli high-tech market, is ready more than ever to increasing investments from risk evasive cultures (mainly in continental Europe) in early stage Israeli companies, that can find in Israel the advantages that US companies have done for decades, and receive much more mature market then in the past, but with lower valuations and a very developed corporate culture

For more information on the above or in other matters, please contact Oren Speiser (orens@grs-law.co.il).