The ongoing Coronavirus pandemic has definitely posed a threat to Israel’s high-tech ecosystem in 2020. Many claimed that funding rounds would disappear, acquisitions would be called off, and the whole ecosystem would never be the same. As we enter the final week of 2020, it’s time to take a look at the reports that recap the weird year that was for Israeli high-tech.
M&As down - IPOs up
According to a report published by PwC, 2020 produced less acquisitions, but those that were acquired harvested record sums. In total, acquisitions and IPOs in 2020 hit $15.4 billion, in comparison to $9.9 billion last year in 2019. PwC report 2020’s total as record numbers, even surpassing 2014’s totals, when Mobileye went public.
Average transaction totals also increased to a record breaking $257 million per. However, according to PwC, this monumental increase coincides with a 25% drop in total transactions, currently numbering at 60 deals in 2020, in contrast to 2019’s 80 transactions, which obviously raises the mean.
Another record was broken in the IPO department, with 2020 registering 19 IPOs in comparison to 13 in 2019, marking significant public offerings such as Nanox, JFrog, and Lemonade. The total value of 2020’s IPOs skyrocketed to $9.2 billion against 2019’s $2.1 billion, and the average offering climbed up to a whopping $489 million this year.
In addition to PwC’s report, IVC also published their yearly recap reports, telling a slightly different story. IVC reported a sharp decrease in M&As, totaling $7.8 billion in 93 different transactions in 2020 versus 2019’s $14.24 billion in 143 different transactions. There is a difference in the methodology between both reports, as PwC doesn’t include secondary IPOs or acquisitions of publicly traded companies.
Partner and Head of high-tech cluster at PwC, Yaron Weizenbluth, noted that “Despite the 25% fall in the number of deals, taking a more granular view highlights even further the remarkable ability of the local tech industry to recover, with the number of deals going from 26 in H1 to 34 in H2, including 16 IPOs (vs. only 3 in the preceding half-year).”
Funding rounds rise
IVC also recapped the funding rounds for 2020, and from their data we can see that Israeli startups closed 579 deals, totaling $9.9 billion - a 14% increase in transactions and 27% rise in invested capital in comparison to 2019. Here as well, there are a few factors that caused the average to rise, and according to IVC 7 rounds of over $200 million helped this year, versus only 3 in 2019.
Despite VC funds investing more this year in comparison to last, but it seems as if investors preferred to focus on their existing portfolio companies, rather than scouring the market for new adventures. We saw relative decrease in Seed and Series A investments, standing at $1.6 billion, but things started to pick up during Q4 2020. In contrast, advanced stage startups broke funding records, bringing in $8.33 billion in total.
The authors of IVC’s report claimed that following the COVID-19 pandemic, 2020 experienced a sharp decrease in Israeli M&As, while at the same time seeing a significant rise in fundraising, coming from Israeli and foreign investors, both in number of transactions and in total capital raised.