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While the high local demand for funding has mostly been filled by foreign investors,
Israeli VC funds have also lately gained growing contributions. In 2012, Israeli VC
funds raised a total of $885 million, in 2014 they far surpassed this number raising a
total of almost $1 billion, with a greater than 20 percent increase expected by the end
of 2015.
In the wake of the enactment of the US JOBS Act in April 2012 and growing public
interest, the Israeli Parliament received a bill proposal that included provisions similar
to the JOBS Act. This development inspired robust public discussion among relevant
interest groups, leading the Israel Securities Authority to propose regulations for
crowdfunding based on an early 2014 report by the Committee for the Promotion of
Investments in R&D Public Companies. This legislative process is expected to rapidly
bear fruit, with crowdfunding thresholds being significantly reduced. Despite the
regulatory lag, however, in 2014 four of the top five angel investor groups placing
funds in Israeli hi-tech companies were Israeli crowdfunding platforms powered, under
current limitations, by accredited investors only.
Theentire Israeli hi-tech industryhasprosperedfromthis increased investor confidence
– The size of the average hi-tech financing round in Q2/2015 was almost double the
average registered in Q2/2013 – especially the information technology, enterprise
software, and internet sectors, which have attracted relatively large amounts of
capital of late. More particularly, the prominent Israeli cyber-security segment has
recently shown marked growth, as over 100 cyber-security startups incorporated in
2014, while Israel continues to export more cyber-security products than every other
country but the United States. Viewed in light of the rising number of cyber-attacks
world-wide, the Israeli economy’s response, with its roots deep in Israel’s military and
intelligence legacy, is not surprising.
Israel built its reputation for high-end hi-tech innovation in the 1980s and 1990s. This
period sprouted large global companies such as Amdocs and Check Point Software
Technologies,but for years,these and a handful of other companieswere the exception
and not the rule, as most Israeli hi-tech companies opted to cash in quickly. In recent
years this pattern has begun to change. Investment amounts continue to grow,
emanating from a higher variety of sources, with legislation expected to provide the
freedom for this trend to continue. In turn, Israeli companies have allowed themselves
to reach unprecedented levels, while providing returns that can compete with, if not
surpass, returns anywhere.
The crowdfunding scene is likewise growing ever more vibrant, although
legislation in Israel still grants only accredited investors the freedom to fund
private companies.