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The number of unicorns emerging from Israel also shows the accelerating
strength of the Israeli hi-tech market. Since the beginning of 2013 alone,
Waze was sold to Google for $1.1 billion, Mobileye raised almost $890 million
at a market value of $7.6 billion,13 and Wix has been valued at over $1 billion
following its IPO.
16% of total exit proceeds in 2013, while in 2014, Israeli companies that opted for
an IPO received 66% of total exit proceeds, showing that more and more companies
are choosing the IPO path over the M&A path, resulting in a larger number of mature
companies inhabiting the local ecosystem.
Other companies yet to move to exit that have also been valued at or above the $1
billion mark include Taboola and ironSource. This phenomenon is sure to escalate as
the number of experienced entrepreneurs founding more than one startup is also on
the rise, having grown from 16% of all entrepreneurs to 25% in just five years.
Israeli companies and entrepreneurs have surely benefitted from these developments,
while investors have also been rewarded for investing their money in Israel, as opposed to
other markets. According to studies conducted jointly by our firm and Fenwick andWest
LLP, investors are consistently offered better preference rights in Israel, in contrast to
Silicon Valley. Between 2011 and 2014, upwards of 70%of financing rounds (amounting
to $500,000 and more) included senior liquidation preferences for those choosing to
finance the Israeli startup scene, as opposed to 40% for those choosing to invest in
Silicon Valley. Furthermore, investors' potential to double dip in Israel is at an annual rate
well above 50%, whereas in Silicon Valley, the annual rate has dropped below 25%.
Investment terms are better for those consummating transactions in Israel rather than
Silicon Valley, and the price of the same equity stakes in comparable companies is
cheaper in Israel as well. Since 2010, venture startups have been valued at an average
of $4.9 million in Silicon Valley, while in Israel, similar companies have been valued at
an average of $3.6 million. Those injecting funds into Israel have surely been satisfied,
moreover, with the relative return on their capital: In 2014 the average successful US-
based startup raised $41 million and exited at slightly over $243 million, at an average
value creation of 5.9X. In contrast, since 2011, similar Israeli startups raised $28 million
(diluting the investors less along the way) and exited at roughly $192 million, at an
average value creation of 6.9X.
A wide variety of venture investors are increasingly taking note of the strengthened
Israeli hi-tech industry. In 2014, for example, foreign investment, overall, amounted
to $1.9 billion, accounting for 56% of the funds raised by Israeli hi-tech companies.
Particularly conspicuous in recent years among foreign investors has been the entry of
Chinese investors into Israel. NineChinese-based investors invested in Israeli hi-tech
in 2012. That number rose in 2013 and yet again in 2014, when a total of 22 Chinese-
based financiers invested almost three times the amounts invested by Chinese
investors in 2012. The Chinese appetite for Israeli hi-tech has not stopped at direct
investment in startups, as investors from China account for approximately 30% of
the capital raised by Israeli VC funds. Additionally, Russian venture capital investment
firms have shown rapidly increased willingness to devote funding to Israeli hi-tech
companies. Foreign corporate investors have been active in Israel too. For example,
Intel Capital made six first investments in Israeli companies in 2014,Microsoft Ventures
made six of its own, and Samsung Venture Investment Corporation added four more.