“Uncertainty for the public market and for investor sentiment is toxic”

“We saw very favorable market environments given the low-interest rates in the past year,” explained Irit Kahan, Head of DTCP Israel, Growth Equity. “What happened now due to several macroeconomic events is that we are seeing a lot of uncertainty in the market.”

Kahan made the opening remarks on stage joined by Yuval Cohen, Founder and Managing Partner at StageOne; Idit Muallem, Partner at Pitango Venture Capital; and Guy Navon, Ph.D., Head of Discount-Tech. Together, the four of them shared the stage for a panel at Calcalist’s Unicorns Forum that discussed the Israeli market, its current crisis, and the future of the public and private markets.

Kahan continued: “Uncertainty for the public market and for investor sentiment is toxic. We have seen a big tectonic shift in the market environments for venture capital investments, and I think that's where we are currently. People are waiting to see where this uncertainty plays out, where the market will be in the next few months by the end of the year, and I think that's exactly where we are in the current stage. That's why in the growth stage, where DTCP is active, it's more waiting to see where valuations will play out for growth-stage companies. There is no crisis in the technology fundamentals... there are amazing companies out there, it's just we have all seen the downfall of the tech market in the public market and it takes time to see the effect and impact on the private side in the growth stage.”

“If I spoke about the IPO market, the title would be ‘Back To Reality’, because if you look at the Israeli market, the Israeli IPO market, mainly on Nasdaq, over the last 20 years, I think that more than 80% of the exits in the country were M&A versus 20% IPOs,” added Yuval Cohen, Founder and Managing Partner at StageOne. “What we’ve seen over the last 2-3 years is an increasing number of companies going public, some of which were not companies that were valued and strong enough to go public. I think the market is going back to this ratio of 80/20. I think it is a good process and people tend to forget that if you look back, I believe that from 2002/3, till 2010 there was not a single IPO of an Israeli company on Nasdaq. I believe the first one was Imperva in 2011 and nobody can tell you when the market will reopen again but I think this ratio will go back to 80/20.”

Idit Muallem, Partner at Pitango Venture Capital, added: “Obviously we will need to see six months of stable markets to start timing the IPOs, and then obviously it will be with the very best companies, the $200 million in revenues meeting all the KPIs of growth and burn multiples, and that means the bar is getting higher and higher for an IPO but also in all levels, in the private rounds. These will be the standard KPIs that will be compared, so you need to keep that in mind as well.”

Guy Navon, Ph.D., Head of Discount-Tech, concluded the opening remarks by discussing inflation and how it affects both private and public markets. “The high tech ecosystem is very sensitive to the real economy, and until recently there was no inflation, lots of easy money, and the real economy is changing. There is global inflation in many countries and central banks are closing their doors. So we see a change that started in the public companies and the correction is now getting into the private companies as well. This is a correction, a healthy correction. We anticipate seeing companies taking advantage of this and becoming stronger and healthier and probably we will see some companies that will cease their operations or complete M&As.”

You can watch the entire panel in the video above.