The past twelve months were by far the best to date for startups receiving funding within Start-Up Nation. Total investment in Israeli startups was close to $10.3B. This is incredible considering most of the rest of the world struggled with operations due to a global pandemic.
The hottest sectors for 2020 included Cyber security, FinTech, and Smart Mobility. The increase in workers operating remotely and the need for company data to be easily integrated from multiple locations supports the interest in investment in all of these. It was also unfortunately quite common in 2020 to hear about data breaches every few months, which strongly supports the need for better privacy control systems for companies.
FinTech has been a growing vertical worldwide for a while, and large players within Israel include eToro, and PayKey, among others. eToro is a website where you can learn the basics about different cryptocurrencies, and then once armed with that knowledge, purchase virtual currencies like ETH and BTC. There also is a feature where you can do the same trades as very popular traders, a relatively newer strategy for virtual currencies. PayKey is a company allowing businesses to offer customers immediate access to various financial services while on their phone. This will be especially popular to banks, who want to maximize their touch points with customers. The customer only needs to use their messaging keyboard in order to use their services.
Cyber security is the most well-known category for Israeli startups and by far received the most investment last year. Specific companies include Perimeter 81, Aqua Security, and Wiz. The incredible fact about Wiz, which is a cloud design platform, is that within one year of beginning, they secured their first funding round, which totaled eight figures and became backed by some of the biggest names in Silicon Valley. Perimeter 81 was created to give secure network access to companies, and touts itself as a leader in Secure Access Service Edge (SASE). Aqua Security protects a company’s applications from development to production, across all workloads, and up and down the stack. All three of these companies definitely have a sizable market, and a growing one too.
Thinking in terms of investments for early stage versus growth stage startups, it should come as no surprise that later stage companies received the bulk of the funding, as investors took the year to reassess their winners and losers, and decided to pour money into startups that had previously been a success in terms of revenue, product market fit, and already lean operations. Investors have been sitting on dry powder for a while, and in 2020 they seemed to take marginally less risk due to the impact of covid-19. This trend is likely to continue for the first half of 2021, but has a chance of evening out again amongst all companies looking to raise.
Another trend that has been noticeable for a few years which continued in 2020 is that the size of the investment round continues to go up. Series A rounds of 10 years ago now look like Seed rounds today, and this trend was not hindered at all by a global crisis. Some in the industry say that inflation is the cause for higher valuations, but more realistically it is due to there being many more private investors (VC’s, PE firms, Angels, Strategics) than ever before. Expect this aspect of valuations to continue in the future.