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2019 is shaping up to be an incredible year for Israel’s tech scene

By Amit Karp 4.17.19

Only four months ago when the stock market tanked, it seemed like we were heading for a very tough year. However, as it turns out, it’s been one of the best starts for the Israeli tech scene. As we enter Passover holiday for 2019, it’s good to acknowledge what’s going well.

Mega acquisitions

Intel’s acquisition of Mobileye two years ago for $15.3 billion set a new bar for how high Israeli companies can aim. This year, NVDIA buying Mellanox, the connectivity chipmaker, for $6.9 billion, reaffirmed that Israel still holds the potential to grow additional companies to the same scale as Check Point, now worth $20 billion.

These mega exits paired together with an emerging crop of newer publicly traded Israeli companies finally debunks the myth that Israel is only for early stage startups. Wix, worth $6.2 billion, and CyberArk, worth $4.5 billion, are not just leaders in the Israeli tech scene, but across the globe.

New set of buyers

There’s a new set of non-traditional buyers looking to benefit from the Israeli ecosystem in the same way that most of the tech giants have done in the past. Forget Microsoft, Google, and Intel, and say hello to Coca-Cola, Disney, and Costco.

McDonald’s acquisition of the personalization startup Dynamic Yield for $300 million last month is just one example of the many non-traditional acquirers emerging in the Israeli tech scene. Just a few weeks ago, Walmart CEO Doug McMillon visited Israel searching for interesting startups. These new buyers in Israel also point to potential collaborations and acquisitions.

Cyber is heating up

The Israeli cybersecurity industry has long been recognized as a major source for innovation. Until recently, many startups purely focused on building a solid product with the plans of selling the company to one of the larger cyber incumbents.

As these companies continue to raise larger amounts of funding, including container-security company Aqua, which raised a $62 million round, and internet of things security company Armis, which raised $65 million, startups are increasingly scaling and not necessarily selling too early.

Palo Alto Network’s acquisition of Demisto for $560 million and Symantec’s acquisition of Luminate for $225 million are two noteworthy exits this year.

IPOs are back

After a long drought of Israeli companies going public, cybersecurity company Tufin trades at a market cap of $600 million. This is the first of many Israeli startups positioned to go public, assuming macro conditions remain stable. Companies such as Fiverr, Zerto, and Payoneer are all rumored to be eyeing an IPO.

Slew of acquisitions across sectors

Since the beginning of the year, we have seen a large number of Israeli acquisitions across a wide range of sectors: Infrastructure companies Alooma (acquired by Google for $150 million) and CloudEndure ($200 million acquisition by Amazon), cybersecurity startups Demisto (acquired by Palo alto Networks for $560 million) and Luminate (acquired by Symantec for $225 million), SaaS startup Samanage ($350 million acquisition by SolarWinds) and Dynamic Yield (acquired by McDonalds for $300 million), video creator Magisto (acquired by Vimeo for $200M), and semiconductor company Corephotonics (acquired by Samsung for $150 million) were all acquired in the past few months.

Mega funding rounds

This upsurge in activity goes hand in hand with a large increase in funding for Israeli startups. For example, AI-insurance startup Lemonade announced a $300 million round which brings its total funding to $480 million.

These enormous rounds were unimaginable for Israeli startups just a few years ago. While not all these companies will succeed, this virtuous cycle should lead to more mega exits and larger public companies coming out of Israel which will improve the pool of talent and further increase funding.

Yes, it’s true that the market will have to cool down at some point. But there is one thing which is already clear– Israel’s startup nation is rapidly progressing towards becoming scale up nation. In fact, there’s never been a better time to be a founder in Israel.