$3.6b in funding and $5.4b in exits for Israel’s startups in 2015: report

Photo credit: Heisenberg Media .

There’s no doubt that Israel has one of the hottest startup ecosystems in the world. The small size of the domestic market hasn’t deterred Israeli entrepreneurs. They think globally from the outset, and build companies designed to add substantial value.

You may not know it, but the next time you book a flight, receive a payment, or check a website’s rankings, you’re likely using a product developed in Israel. Little wonder the country is referred to as the “Startup Nation.”

The figure represents 69 percent growth from 2014.

2015 was another stellar year for Israeli startups, according to a report by Geektime. 1,400 new companies were registered, out of which 373 raised some form of investment, with a combined total of US$3.58 billion. The average deal size was US$10.87 million. The final figure is probably higher – the report only took into consideration investments of US$500,000 and above.

The tally represents 69 percent growth from 2014, when there were 297 funding rounds with a combined total of US$2.2 billion.

If that’s not enough to take your breath away, consider this: 69 Israeli startups were sold in 2015 for total payment of US$5.41 billion. For every US$1 invested, investors saw US$1.50 in returns. That’s a 50 percent gain.

Photo by Serge Kij.

Big deal

The biggest funding round in 2015 was for enterprise storage startup Infinidat, which raised US$150 million in series B financing. Medtech startup Valtech Cardio, which focuses on devices for aiding non-invasive heart valve surgery, was bought by American Heartware for approximately US$1 billion in a stock exchange deal.

Israel’s total funding figure for the past year doesn’t compare to the US’, where US$60 billion was invested in startups in 2015. Or Europe, which saw US$12 billion invested, the report says. Meanwhile in China, the Tech in Asia database shows US$36 billion in funding was raised last year, while the figure for India clocked in at US$7.7 billion. Nonetheless, on a per capita basis, Israel is miles ahead of the rest with US$423 in investment cash per person, dwarfing America’s US$186.

To support these startups, it’s necessary to have efficient accelerators and an abundance of co-working spaces. Currently, there are over 80 accelerators present in Israel, including those that are funded and backed by Microsoft, Yahoo, AOL, Barclays, and Citibank. In addition to these, there are 22 co-working spaces, some of which occupy entire buildings.

The report does, however, note that 2016 may be a year of consolidation for Israeli startups. Inflated valuations and blockbuster funding rounds will give way to more “sane valuations.” Adtech and cybersecurity, traditionally considered the backbone of Israel’s tech industry, will continue their growth momentum, and crowdfunding is set to become even more relevant as more investors scramble to get a piece of the pie.

Israeli entrepreneur Ben Lang, founder of location mapping startup Mapme, predicts cybersecurity, drones, and fintech to dominate the coming year. He says it’ll be “interesting” to see if the country can produce another blockbuster business-to-consumer startup, like Waze, which was acquired by Google for approximately US$1 billion.