Israel's tech sector awaits UAE investment bonanza

Both dollar flows and deals shot up into record territory despite pandemic

Last updated: January 24, 2021 | 12:35

2 MIN READ

Israel continues to experience a boom in its tech and tech investments space. Foreign fund flows into the sector continues unabated, hitting record highs in 2020.

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Dubai: UAE investors could lead the next wave of funding opportunities into Israeli tech companies, which recorded another bumper year in drawing global interest.

These tech firms didn’t seem to feel any impact from COVID-19 disruptions, tapping $10.2 billion via 607 deals through 2020. That’s a 31 per cent increase in the volume of capital and a 20 per cent gain in number of deals compared with 2019.

This is according to IVC-Meitar Israeli Tech Review 2020, which sees “many maturing Israeli tech companies turning to capital markets this year” and “creating opportunities for UAE investors”.

Venture capital backed deals increased in 2020 - both in monetary volume and number of deals - to $8.95 billion compared to $6.52 billion (320 deals) in 2019.

Investments in early rounds (seed and A rounds), however, declined in the first two quarters of 2020 due to uncertainties surrounding COVID-19. But Q3- and Q4/2020 saw an increase in VC fund capital flows.

Total investments in "growth" companies were $8.54 billion, while early-stage companies raised $1.63 billion.

There were 19 IPOs by Israeli tech companies in local and foreign capital markets in 2020, with a total offering of $1.6 billion.

In rude health

A record 128 publicly-traded Israeli tech companies raised $6.96 billion compared to $1.95 billion by 68 companies in 2019. According to Shira Azran, Partner at Meitar Law Offices, “Specifically, financing among growth companies showed a significant increase, as did the total number of rounds. This demonstrates the maturity and development of the Israeli high-tech industry, manifested, among other things, in the increased number of companies that have crossed the billion-dollar valuation.”

“Faced with the industry’s financial challenges, the next year (2021) is expected to see Israeli institutional investors increasing their involvement in the field, and helping local companies reach new heights.

Shira Azran, Partner at Meitar Law Offices

Special purpose

Last year saw a significant increase in financing by Israeli tech companies on the capital market as well as significant growth in SPAC (special purpose acquisition companies) deals. "We see this trend continuing in 2021, and many large companies that have matured in recent years will examine the option of public capital markets for continued growth and development,” said Azran.

“We believe it will lead to an increase in M&As in these companies, where traded shares will be used as currency."

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