Israeli High-tech Firms Raise Record $4.8 Billion in 2016

As the big era of exits ended, acquisitions of Israeli tech firms fell in 2016 to their lowest level in six years.

High-tech workers in Israel.
Tomer Appelbaum

Israeli private high-tech companies, a main driver of the country’s economy, raised an all-time high of $4.8 billion in 2016, up 11% from 2015, according to a report released on Tuesday.

The average funding round in 2016 reached a record $7.2 million, while the number of deals closed last year slipped 7% to 659, according to the Israel Venture Capital Research Center and the Israeli-American law firm ZAG-S&W. In the fourth quarter, high-tech firms raised $1.02 billion.

Traditionally, many of Israel’s tech companies have sold out at an early stage to global giants like Cisco, IBM and Microsoft. But now start-ups are using a sharp rise in private investment to pursue growth, often aiming for eventual stock market flotations. With founders looking longer term rather than trying to make quick money, acquisitions of Israeli tech firms fell in 2016 to their lowest level in six years.

Koby Simana, the chief executive of IVC Research Center, said there was a 30% drop in the number of second funding rounds closed in 2016. “This is a troubling trend for the Israeli VC funnel, since the majority of capital goes into later rounds – if there are no companies lined up for later investments, there could be a more serious issue later on,” he said.

Shmulik Zysman, a partner at the ZAG-S&W firm, said the uptick in capital being raised is expected to continue in 2017, though possibly at a slower pace.

In the first major fundraising success of an Israel-linked high-tech company in the new year, flash-storage firm Kaminario announced Tuesday that it had secured $75 million in a new financing round. This brought its total funding to $218 million.

This latest round was led by the private equity firm Waterwood and included new and existing investors including Sequoia Capital, Pitango Venture Capital, the Lazarus Hedge Fund, Silicon Valley Bank and Globespan Capital Partners.

Formally based in Needham, Massachusetts, the company was founded in 2008 by its CEO Dani Golan and Ofir Dubovi. Kaminario has a development center in Yokne’am in northern Israel. The company has 277 employees, about half of whom are in Israel, with the rest in the Boston area and elsewhere around the world.

Golan is a former chief executive of Performix, which was acquired by Nice Technologies. Before that, he headed EMC’s new ventures efforts. His LinkedIn listing states that he did his Israeli military service as a fighter pilot.