The golden age of high technology: 2021 in venture capital


Israel’s ecosystem, which was once a small-scale model of Silicon Valley, has matured on its own, quickly biting the heels of the Bay Area while showing off its own peculiarities and flavors.

2021 has been a year of growth and change for investors. Venture capitalists only manage 2% of institutional assets globally, but in 2021 the asset class invested around $ 580 billion, almost 50% more than in 2020. This influx of capital meant that even new sectors were funded to evolve last year. This growth has interspersed with almost every element of Israel’s high-tech ecosystem.

Inflationary seeds bloomed

As plentiful capital seeks returns in an inflationary environment with near-zero interest rate policies, valuations have been pushed further as the discounted potential value of a startup moves away from traditionally accepted norms, such as This is evident in early stage global median valuations rising. to $ 53 million, a substantial jump from the $ 30.5 million of the 2020s.

In Israel, transactions rose and valuations followed, and not far behind, increasing amounts of dry powder. In this environment, Israeli venture capital funds competed with the best entrepreneurs, alongside local and international funds. Looking to the future, venture capital funds have realized that companies are making their debut on global stock exchanges as a vehicle for raising capital while continuing to focus on expanding to new heights. Fund models support this change by allowing the fund, at maturity, to move from venture capital to hedge fund, as Sequoia has demonstrated and demonstrated.

Companies that were once early stage start-ups have reached a level in which corporate strategy offices play an increasingly important role, with mergers and acquisitions reaching $ 9.5 billion in total value created . More interestingly, 30% of the 86 M&A deals that took place this year were “blue and white,” where both buyer and seller were Israeli.

Another result of Israel’s “tech boom” is the talent shortage. The ever-growing need for more talented employees and the competitive employment landscape challenged the founders to retain talent and fill vacant positions. Ultimately, forcing a need to raise additional capital to meet salary expectations and rework option models to attract the best. Additionally, new startup millionaires have started roaming the streets of Tel Aviv (now the most expensive city in the world) due to the 57 public listings of Israeli companies this year. If you are an employee, it is a market of job seekers. If you’re a start-up, it’s an entrepreneurial market, and if you’re a venture capital fund, you need to be able to operate in a market where valuations are high, but the potential is higher. The Decacorne is the new Unicorn.

With so much floating capital, leading investors seized the opportunity to raise a SPAC. The sponsors of SPAC, operating under a two-year time constraint to find a target, and the Israeli founders, seeking to create shareholder value, saw each other as a perfect match.

Trials, tribulations and new solutions

Over the past year, some sectors have gained new independence and global recognition. Foodtech, a prime example of an industry that was once a niche, is now its own vertical currently enjoying a deep tailwind. The current composition of the food industry, not sustainable from a health and environmental point of view for the population of tomorrow, has an addressable total market large enough to offset any short-term pressure on the supply chain where everything from ingredients to shipping costs has seen price inflation this year. Israeli venture capitalists have recognized this age-old growth and have invested around $ 480 million in the food and agri-food tech space in the first three quarters of 2021 alone.

The many problems in the world are not only reflected in the way society eats or produces food, such obstacles extend to humanity’s approach to climate change. Global consumption of nonrenewable resources, against the backdrop of untimely unit economic costs of current renewable solutions, fails to provide solutions to this problem. As Western governments have started to fill the demand vacuum, the private sector has a responsibility to ensure adequate supply, and companies are playing their part to bring renewable and green hydrogen to market at a fraction of the cost. cost.

Digital health has also received more zealous attention in 2021 as the world grapples with the backlash from COVID-19 and technology has become key to how we manage our health.

The digital asset market has also transformed, as we are now seeing real use cases and applications brought to market and generalized to crypto. As blockchain technology matures to become infinitely more scalable and traditional businesses branch out into crypto, we expect this trend to grow exponentially. From DeFi (decentralized finance) to the metaverse, the dynamic has changed, and with it, the potential for digital assets to redefine the number of industries that run business, art is owned and games are played.

Finally, as in all industries, there is a mismatch between women in leadership positions and the number of women working in the ecosystem. In 2021, we also saw an improvement in this regard with more women and minorities in leadership positions in the tech ecosystem.

Where we’re going, we don’t need roads

While there are macroeconomic challenges, Israel’s relentless introduction of technological solutions to common global problems and niche markets leaves us excited for the year ahead as the world continues to see what blue human innovation is. and white will bring technology.

Written by Mor Assia and Shelly Hod Moyal, founding partners of iAngels


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