In 2021, the Israeli ecosystem saw the total funding raised reach a new peak of $27 billion. That is more than double what was raised in 2020. Almost a third of the year's funding came in during the fourth quarter (Q4) alone, amounting to $8.1 billion.
Security and FinTech
As usual, the Security and FinTech sectors led the Israeli ecosystems in terms of funding; the two sectors were responsible for 42% of the overall funds raised. The security sector grew by 3% (from 21% in 2020 to 25% in 2021), while the Fintech sector grew 1.5% (from 15.5% in 2020 to 17% in 2021). Security and Fintech play a huge role in keeping our digital world running smoothly, and since COVID-19 accelerated the digital transformation, be it by working from home or shopping online, the growth of these sectors is consistent with the growing market needs. These needs will likely increase even more in 2022, so we will surely see these sectors growing further in the coming year. Security and FinTech aside, the IT/DevOps, retailTech, Healthcare, and Semiconductor sectors also showed exponential growth courtesy of the data and digital transition.
From Startup Nation to Unicorn Capital
2021 gave Israel the title of unicorn capital of the world. This past year, Israel only came second to the United States in terms of new unicorns. Though Israel stands in 5th place for funding raised (after the United States, United Kingdom, India, and China), they managed to surpass all countries (but the U.S), with 48 new unicorns. It is impressive that Israel was able to crown itself with the second highest rank having only raised $27 billion (whereas China raised $106 billion yet only saw 40 new unicorns, India raised $34 billion and only saw 31 unicorns and the UK raised $36 billion but only established 16 new unicorns). In total, Israel has 64 unicorns across a medley of categories, from security and FinTech, to vertical and horizontal applications, to infrastructure, consumer, AdTech and marketing.
M&A and IPOs Breaking the Mold
The number of mergers and acquisitions (M&A) and IPOs the Israeli ecosystem saw in 2021 shows that it has matured as a whole, but that it has also bounced back from the hiccups of the pandemic; in 2020 there were only 110 exits, while the year before there was 147. Notable M&As include MyHeritage (acquired by Francisco Partners), Guardicore (acquired by Akamai), Chorus (acquired by zoominfo), Espagon (acquired by Cisco), and DSP Group (acquired by Synaptics). Each of these companies was acquired for over $500 million. The mergers and acquisitions of 2021 happened across all stages and markets, from early-stage to exited companies, with both Israeli target markets and foreign targeted markets. What is most interesting is that in 2020, Israeli companies participated in many mergers and acquisitions as the acquirer which is a 56% increase to the previous year. Companies like ironSource and Bizzabo made 4 acquisitions each in the past year alone.
Though the pandemic seems to be subsiding, there is no predicting what the future will hold. However, based on 2021’s analysis and evaluation, it seems that 2022 will have a similar fate. We look forward to seeing where Israel’s ecosystem at large will take us in the coming year, and to all the new and innovative technology we have yet to see.
To find out more about the report and its findings, click here.