Israeli Tech in 2019: Winners, Losers, and Everything in Between

2019 was one of the best years for Israel’s tech and venture capital industries, concluding a successful decade. With mergers and acquisitions (M&As) of Israeli technology companies totaling $9.9 billion and several successful initial public offerings (IPOs)—including Cybersecurity company Tufin Software Technologies Ltd., online gig marketplace Fiverr Int. Ltd., and aesthetic medicine company InMode Aesthetic Solutions Ltd.—2019 marks another year of growth and maturation for the local industry.

This year’s significant late-stage funding rounds by Israeli companies—such as real estate company Compass Inc. that raised $370 million in July, bringing its total capital raised to date to over $1.5 billion, and online insurer Lemonade Inc. that raised $300 million in April—are also signs of a maturing industry.

At the same time, the local venture capital industry must deal with the changing terms and the challenges they bring. The capital markets are stable, showing steady growth, and the private sector is not short in cash for investment, which means that while an IPO is still considered a desirable status symbol, companies are by no means in a hurry to look for funds on the stock market. In the past, startups had between five and seven years to make an exit, a timeframe that was extended to 10 years just recently. In the past year, data shows it has further extended to 14 years.

Despite overwhelming success stories for Israeli companies, perhaps the most memorable event will be the downfall of the year and perhaps the whole decade: that of coworking space company WeWork and its co-founder and ousted CEO Adam Neumann. Neumann and his managerial approach were undoubtedly a part of the problem but cannot be held solely accountable for the company’s swift and painful crash. Neumann was the poster boy of an all-too-common thorn on the global tech industry’s side: a young enthusiastic entrepreneur shining too bright for too short a time, while being fueled by eager investors, in this case, Japanese holding company SoftBank Group.

This triangle—composed of a charismatic entrepreneur, a company that appears to be a tech company but whose business model is not related to the industry, and an investment body looking to rake in a high and swift return on its massive investment—is what sent WeWork skyrocketing but also brought it all the way down to top this year’s greatest losers list.

Another glorious failure of 2019 can also be marked as one of the local tech industry’s greatest success stories—the moon crash of Israeli spacecraft Beresheet. The independent space exploration project that launched in 2017 managed to bring a pioneering Israeli probe 15 kilometers away from the moon’s surface in just two years, making Israel a member of an exclusive club of countries with similar capabilities. Though the low-budget Beresheet project failed to achieve its original goal and crashed during landing, it remains an inspiration to tech entrepreneurs in Israel and around the world.

Other winners that are also losers, or losers that are also winners, are two competing content aggregation companies Taboola.com Ltd. and Outbrain Inc. After years of speculations and secret negotiations, the two rivals announced a merger in October. Arguments for listing them as winners are pretty straight forward—the merged company controls the global recommended content market, estimated at billions of dollars a year and the merger will give it more leverage when negotiating with clients, making it more efficient.

On the other hand, until recently many hoped both companies will separately join the Israeli unicorn club, each sporting a $1 billion valuation. But content consumers became less trusting in a world flooded with fake news, and both companies were forced to invest more in fact-checking while still having to compete with dozens of smaller new players with cheaper offerings. These changes to the industry eroded Outbrain and Taboola’s leverage, pushing them to merge.

At the top of this year’s winners’ list are its two biggest exits—Israeli chipmaker Mellanox Technologies Ltd.’s $6.9 billion acquisition by Nvidia Corp., first announced in March, and Intel’s $2 billion acquisition of Tel Aviv-based artificial intelligence chip developer Habana Labs Ltd., announced earlier this month.

Also on the winners’ list are two of the aforementioned companies who made successful IPOs on the New York Stock Exchange—Fiverr that raised $110 million at a valuation of $650 million and Tufin that raised $108 million at a $480 million valuation. Other companies that won a spot on the winners’ list are team management startup Monday.com Labs Ltd., content creation startup Lightricks Ltd., and fraud prevention startup Riskified Ltd., all of which earned their unicorn horns this year.

An honorary spot on the winners’ list goes to Israeli venture capital funds that managed to raise astronomical sums this year and continue to grease the wheels of the local tech industry. Among them are 83North Ltd. that raised a $300 million fifth fund, Aleph Venture Capital that raised a $200 million third fund, NFX Guild that raised a $275 million second fund, and Vintage Investment Partners that secured $133 million for its new growth co-investment fund. But the biggest fund raised is also perhaps the most intriguing: aMoon, founded by Check Point Software Technologies Ltd. co-founder Marius Nacht, secured $600 million in commitments for its second fund, which became one of the country’s biggest funds.