CB Insights quarterly report on global high-tech issued at the end of last week showed that the third quarter of 2021 was a record for the industry, and that Israel had a disproportionate share in this success in terms of fundraising and mergers. European investments went to Israel.
Investments in startups totaled $158 billion in the third quarter – more than a twofold increase from the same time last year and beating the previous record posted in the second quarter of 2021. At the present rate, it looks as though 2021 will break every record for high-tech investment.
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The usual explanations are low-interest rates everywhere in the world, which are pushing investors into investments that promise better returns, as well as the acceleration in digitization processes as a result of the global coronavirus pandemic.
About half the global capital ($72 billion) went to the United States. In second place was Asia, which has registered the greatest growth, with investments of $40 billion.
Europe was third, with $24 billion. Israel, which belongs to Europe, represents about a quarter of all the European investments. According to the Technoblogger website, which keeps track of fundraising in Israel, third-quarter investments totaled $5.8 billion.
Two unicorns born every day
The term “unicorn,” startups valued at over $1 billion, has become almost meaningless, CB Insights CEO Anand Sanwal, said in the report. During the third quarter, an average of 1.92 unicorns were born every single day. During the quarter, another 127 unicorns were added to the global count, an increase of 58 percent. “It took five years to grow from 100 to 500 unicorns, and another year and a half to grow from 500 to 848 unicorns,” said Sanawl. In Israel too, it’s no longer rare for a company to become a unicorn.
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Even fundraising mega-rounds of over $100 million are no longer considered a rare event. In the third quarter, there were 409 mega-rounds – an annual increase of 136 percent, or about six a day on average.
In Israel, according to Technoblogger, there were 16 mega-rounds in the quarter out of 54 in all of Europe. The average value of companies in growth-stage transactions (more mature companies) increased as well to reach $1.1 billion in the third quarter reached $1.1 billion, an increase of 110 percent.
New startups hurting
It turns out that those who are suffering from the popularity of more mature startups are new startups. According to Sanwal, in California’s Silicon Valley the share of early-stage startups fell to a seven-year low of 57 percent, down from 67 percent in 2015. Investors have all gone unicorn hunting, he writes, and that is going to hurt the chances of success for relatively young companies. The slowdown in seed transactions has been evident in Israel, too, for several years.
There has also been a record number of exits: Mergers and acquisitions reached an aggregate value of $7.7 billion in the quarter (not counting initial public offerings), more than in all of 2020.
COVID-19 led to a jump in the health-care field
According to the report, the coronavirus is causing health tech to soar, attracting investments of $97 billion since early 2021, compared with $80 billion in all of 2020. About $1 of every $5 is invested in the industry. In Israel, too, the same pattern has occurred, with huge funds specializing in digital health, the largest of which is aMoon, which manages about $850 million, and others like Peregrine and OTV.
Fintech continues to star in the high-tech industry, and according to the CB Insights report the global industry already includes 200 unicorns, almost twice as many as third-quarter 2020. One out of every three new unicorns is in fintech. Israel has also given rise to several such giants, including Lemonade, Pagaya and eToro.
Sequoia beats Tiger Global
For several quarters the huge New York-based Tiger Global Fund dictated the tone in the investment world, with its aggressiveness and speed. But the CB Insights report indicates that during the quarter the fund lost its first-place ranking of transactions. Today, that honor belongs to the Chinese office of the giant venture capital fund Sequoia (which used to have an office in Israel), with 96 transactions in the quarter, or 1.5 a day.
In second place is Tiger Global, which is active in Israel and in September alone made four local investments. In third place is Japan’s Softbank, with quite a number of investments in Israel.
On the fifth place on the list is Insight Partners, which also has an Israeli office. It is one of the most aggressive funds in the local market, with 73 global transactions in the quarter, 10 of them in Israel.
According to the CB Insights report, corporate investment funds continue to be a leading player in the market, according to Sanwal. The most active fund in the quarter was Coinbase, a cryptocurrency company, and the second was Salesforce Ventures, which made 27 investments in the quarter, and is an active investor in the Israeli market.