Israel tech startups raised $25.4 billion in 2021, report
Start-Up Nation Central recently released a 2021 end-of-year summary highlighting the blistering growth of Israel’s technology sector. The sector raised a record total of $25.4 billion in 2021, according to Start-Up Nation Finder. The unprecedented figure represents a 136% increase over last year, which concluded with a full-year total of $10.8 billion raised.
Although investment in technology companies has grown considerably across the world, the rate of increase of funding for Israeli companies far surpasses the global average of 71%, as well as those of other tech centers, including the US (78%), the UK (105%), and Singapore (95%), according to comparative data on compiled from PitchBook on Dec. 1.
FinTech, Security Technologies, and Enterprise IT & Data Infrastructure – Israel’s Big 3 Tech Sectors
The three sectors that dominated investments in Israel were FinTech, Enterprise IT & Data Infrastructure, and Security Technologies (predominantly Cybersecurity), all three more than doubling FY2020 figures. The leading three sectors made up 65% of total funds raised, compared to 52% of the total raised by the same sectors throughout all of 2020. These sectors emerged as the “Big 3” of the Israeli ecosystem due to the fact that they are comprised primarily of pure software companies capable of delivering rapid solutions and are generally unaffected by distance from market.
2021 Sees a 310% increase in Mega-Rounds
An indication of the hunger for investment in Israeli tech companies was the number of mega-rounds over 2021. Since the start of the year, there have been 74 funding rounds that raised more than $100 million, more than double the number of rounds raised last year. Those rounds raised an accumulated $14.77 billion – up 310% from $3.6 billion last year – and made up more than half the total amount raised in 2021. In addition, the median round size rose from $6 million to $14 million.
33 Companies Join Israel’s Unicorn Club
More than $11 billion – a little under half of the total funding raised this year – went to what has come to be known as Israel’s unicorn assembly line. Thirty-three unicorns (privately held companies valued at over $1 billion) were born this year, more than doubling Israel’s total, which now stands at 53. Like the market as a whole, Israel’s unicorn club is dominated by companies that belong to the FinTech (11), Security Technologies (12), and Enterprise IT & Data Infrastructure (10) sectors.
A Record Year for IPOs and Acquisitions
2021 was also a phenomenal year for IPOs and acquisitions. Fifty-seven companies went public this year, having raised an accumulated $4 billion, nearly tripling the 22 IPOs completed in 2020, which raised an accumulated $1.7 billion. Despite the hype they received this year, so far, only 10 SPAC mergers have closed, raising a total of $4.9 billion. Although the rise in the number of acquisitions may have been more modest (119 up from 91 in 2020), their accumulated value nearly doubled from roughly $4 billion to $7.6 billion. One trend that stood out this year was the increase in the number of Israeli startups acquired by Israel-based companies. There were 39 such deals carried out in 2021, the highest number on record, up from 21 in 2020, another indication that the Israeli innovation ecosystem is maturing.
Foreign Funds Dominate Investments
The massive increase in equity investments in 2021 came with a big shift in the identity of the leading investors in Israel and how much they invest. According to data compiled by Start-Up Nation Central, top investors are participating in many more rounds than in previous years.
While Israel used to be somewhat of a niche market for investors, trends over the last two years – which became even more pronounced in 2021 – show that it is now a go-to source of solutions for the biggest names in the industry. As the following chart indicates, many of the world’s leading tech investment funds substantially increased the number of investments in Israeli companies. Another trend that emerged over the past year is the strong presence of foreign VC funds, which currently make up 7 of the top 20 most active funds and 4 of the top 10. This illustrates the level of attractiveness that Israeli companies hold for foreign investors and their growing influence on the market.