In yet another red-letter day for Israeli high-tech, two U.S. companies were reported to be buying Israeli startups for a combined total of at least $570 million.
Amazon, the giant online retailer, was reported to be in talks to buy Annapurna Labs for a figure that sources involved in the deal told TheMarker could exceed $400 million. If the acquisition is completed, Annapurna would become the U.S. company’s first research and development center in Israel.
Meanwhile, audio equipment manufacturer Harman International Industries, which sells its products under brands including JBL, Mark Levinson and Harman Kardon, said it was buying Israel’s Red Bend Software, which specializes in mobile software management, for $170 million.
The two acquisitions and the big fundraising capped a week of huge deals for Israeli tech companies. They include Microsoft’s $50 million acquisition of Equivio, whose software enables complex searches of corporate and legal databases, and Dropbox’s purchase of CloudOn for a reported $100 million.
It was also a stellar week for fundraising by startups, topped by Ravello raising $28 million in a round led by the U.S. companies Qualcomm and Sandisk. AppsFlyer and EarlySense each raised $20 million and the U.S.-Israeli startup Taykey raised $15 million. There was also a host of smaller fundraising rounds this week.
The U.S.-Israel startup BlueVine, which provides small businesses with working capital by paying them advances on their invoices, said on Thursday it had raised $18.5 million.
The round was led by the Israeli venture fund 83North and Lightspeed Venture Partners, with the participation of Silicon Valley Bank, Correlation Ventures and other investors, BlueVine said. The company conducts its invoice financing, or factoring, online.
The feverish activity on both the M&A and fundraising fronts in just the first three weeks of 2015 suggest that Israel’s tech sector is headed for another record year.
On Wednesday, IVC Research Center and KPMG reported that nearly 700 Israeli startups raised some $3.4 billion in capital last year, beating the $3.1 billion raised in 2000, on the eve of the global high-tech bubble. It was also up 26% from 2013, IVC said.
In the fourth quarter alone, 184 companies raised a combined $1.1 billion, the highest quarterly total since 1999, IVC said.
IVC said 2014 saw many fundraising rounds that exceeded $20 million.
“We believe that the maturity level of Israel-based companies in 2015 will attract private equity investors, resulting in even higher amounts raised per revenue-growth company,” said Ofer Sela, a partner in KPMG Somekh Chaikin’s Technology group..
The fundraising data came on the heels of a record year for Israeli high-tech exits through mergers and acquisitions and initial public offerings. Exits totaled $6.94 billion in 2014, a 5% increase from 2013 and 28% more than the average of the last decade, Meanwhile, Israeli venture funds raised $914 million, the most in six years, according to IVC.
Harman said on Thursday it would pay $71 million in cash and approximately $99 million in stock for Red Bend, whose CEO is Yoram Salinger. Red Bend shareholders would also be eligible for a cash earn-out up to $30 million in the first quarter of 2017 if certain performance milestones are met, it said.
Harman also bought the Silicon Valley-headquartered software services company Symphony Teleca for $780 million on Thursday. It said both acquisitions were aimed at expanding its offerings for the “connected car,” a vehicle equipped with Internet access.
“Harman will accelerate Red Bend’s growth in the automotive space and will position Red Bend software as the de facto standard for over-the-air software services for mobile devices and automotive applications,” the U.S. company said.
Neither Amazon nor Abbapurna were prepared late on Thursday to comment on the news, which was first reported by the Calcalist financial daily.
Although the acquisition of Annapurna would give Amazon its first formal R&D presence in Israel, TheMarker has learned that the company in fact operates a team of about a dozen people in Israel that will form the kernel of its first official R&D center in the country. The team was formed from employees of two startups bought by Broadcom in 2010 and shuttered a few months ago working in the area of mobile platform systems.
Founded in 2011, Annapurna has not revealed what kind of technology it is developing. The Wall Street Journal reported it was networking chips for data centers, which would be relevant to Amazon’s cloud computing services business.
The sale to Amazon would mark the second big exit for Annapurna’s founder, Avigdor Willenz, founder of the chip-design company Galileo Technologies. Marvel Technology bought Galileo for $2.7 billion in 2000. The company was initially financed by about $20 million in angel investments and several months ago raised more capital at a valuation of $250 million to $300 million, sources said.
Amazon has been searching for Israeli acquisitions for some time to help with its cloud business, industry sources said. Although best known as an online retailer, Amazon has more than a million customers for its cloud-computing services. While the company doesn’t release figures on the segment, it is believed to have generated $5 billion in business from cloud services.