Today more than ever, the journey to the exit passes through many challenges/Unsplash
On October 7, with the outbreak of the war, all transactions in Israeli high-tech were frozen and there was real concern about the relevance of local high-tech in relation to competing companies operating in more stable countries around the world.
Very quickly the reality turned upside down and already at the end of October it was reported about the exit of hundreds of millions in the cyber field. At the same time, an Israeli-global campaign began under the slogan Israeli tech delivers - NO MATTER WHAT (Israeli high-tech from Delaware in any situation), which was mainly focused on the USA and was even projected on the Nasdaq screens to convey the message to senior executives in the business sector.
Despite the migration to the USA, the high-tech is still here
The founders of Fluo Security, Jonathan Roizin (right) and Rom Ashkenazi./Tal Meshulami
Since the beginning of the war, the volume of exit transactions for the sale of Israeli start-ups amounted to approximately 3 billion dollars. Only this month companies were sold for more than 1.5 billion dollars. Crowdstrike, one of the largest cyber companies in the world, announced that it is acquiring the Israeli cyber company Fluo Security in a deal valued in the industry at $200 million.
According to
Jonathan Roizin, CEO of Fluo Security
: "Throughout last year there was a public discourse about the decline of high-tech from the country, fortunately the startups that arose in Israel in the past stayed here and did not rush to leave, and we now see how much value the country receives from this. We saw that high-tech was harnessed to civil initiatives after 10/7, many of the sector's employees mobilized to the reserves, the technology companies continue to provide value to their customers in foreign markets despite all the disruptions."
The exits - a significant source of income for the state treasury
"The exits bring a lot of taxes into the state coffers, we are very proud to be a company that is registered here and pays taxes. There is something very Zionist in everything that happens here, which comes after a year of rift in the nation. I come from a Zionist family, my grandfathers were among the leaders of the Zionist movement in Buenos Aires, for me to establish A startup in Israel and not abandoning the country because of the legal coup or the war is one of the most Zionist things you can do," says Jonathan.
"Acquisitions of startups by foreign companies bring into Israel the activities of large hi-tech companies from around the world, or expand the existing activities of foreign companies that are already operating here. For example, in our transaction as well, the employees of Fluo Security continue with the acquiring company Crowdstrike, which is increasing its presence in Israel and more during the war. Such moves open up Israel to the world and turn the high-tech workers into ambassadors. Employees and executives from the purchasing companies abroad build working relationships and friendships with the Israeli staff, develop empathy for them and are exposed to their personal stories."
According to him, "For these things to continue to happen, the state should not interfere in what is happening In high-tech with regulation, just lower barriers and do not interfere. The industry feeds itself, like I raised capital from former entrepreneurs, who after their exit invested their money back in high-tech, to help entrepreneurs like me start companies. That's how I and my partner Rom plan to give back to the industry, invest and help other entrepreneurs establish the next generation of success stories in Israeli high-tech."
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After the initial market, Israeli high-tech leaps forward
From the right - Itai Rand, Yonatan Sela, Pavel Gurvitz./PR
According to
Itai Rand, a partner in the 10D fund
: "We saw the high-tech jump from zero to a larger volume of capital raising compared to the corresponding period a year ago. In terms of investments, in the months of October-November there was almost no activity in the market, but in the current quarter we see a return of global funds that are interested in Israel. For example, the Sequoia Fund, one of the best and oldest funds in the world, is returning to activity in Israel after years and establishing offices here during the war. Israeli high-tech is at an excellent moment, there are many workers who have returned from reserves in the last few weeks, feeling their presence in start-ups that, thanks to the manpower, have returned to progress at a faster pace. All these factors create the conditions for further exits that will come in the future. The state will also benefit directly from the entry of foreign money into the market, when the amount of taxes that enter the state coffers in each exit varies between 10-15 percent on average of the size of the transaction."
The business is not falling apart, but the negative impact is felt
Pavel Gurvitz,
sold a cyber company he founded for $600 million to Akamai, a serial buyer of Israeli start-ups and currently manages its operations in Israel. "It is true that according to the number of exits there are signs that 'the business is not falling apart'. But unfortunately, the negative impact of the ongoing war and also of the attempted legal coup of the government is definitely felt," he says.
"Without these factors, the situation could have been much better. The high performance of Israeli high-tech that we see is first and foremost a certificate of honor for Israeli entrepreneurs and high-techists, who manage to produce breakthrough technology, build companies and sell them under such conditions, and of course also to investors who manage to raise capital and invest it in companies Israeliness in a period of ongoing instability."
According to him, "Akamai continues to believe in Israeli technology and entrepreneurship, which is why we continue to look for acquisitions here. Israeli high-tech is one of the leading hubs in the world in the fields of cyber, which is very important to us. But the focus of Israeli high-tech on a small number of leading branches of activity, such as the cyber industry for example, greatly reduces the amount The potential buyers for Israeli startups, therefore increasing the risk in the market here. It is enough for a scenario to happen that changes the conditions in the cyber industry, for example, or for something to happen to one of the largest cyber buyers, and it will affect the entire Israeli market."
Competitive advantage and quality human capital
"Recently, we saw 13 acquisitions of Israeli startups in the cyber field, which were sold a few years after their establishment for hundreds of millions of dollars per transaction. This is a field in which Israel has a built-in advantage. We have a developed ecosystem that includes a continuous stream of talents who come to the labor market after receiving practical training in the army. In addition to accumulating Experience working in large public cyber companies operating in Israel, there is a local concentration of experienced entrepreneurs who have already founded successful companies and venture capital funds that specialize in the cyber field," says
Yonatan Sela, a partner in the Square Peg Fund.
"We are beginning to see a strong basis for activity taking shape here in the field of AI as well, but this is an area where we do not enjoy the same kind of advantage in relation to the rest of the world. It is of great importance to have the local presence of development centers of technology giants that focus on the field of artificial intelligence and lead it. For example, Nvidia , the largest artificial intelligence chip company in the world, which has reached a value of more than 2.3 trillion dollars, employs approximately 3,300 people here and continues to make investments and purchases in Israel even though the country is at war. Microsoft's activity in Israel is currently focused on the cyber industry, and it is hoped that it will also expand to the field of AI.
Without stability and social responsibility the industry will not stay here
The local manpower is the reason that these technology giants are ready to contain the excess risk that exists in the activity here. Therefore, Israel must be a place where a quality person sees his future. This way we will maintain our global leadership in cyber, and we will be able to build a strong position for Israel also in the field of AI based on the potential that exists here. A war that will spread over years and acute political instability will ultimately drive away the quality workforce, the buyers who follow in his footsteps, and the investors as well."
In conclusion,
The reports about the exit deals began to arrive after a period of one month from the outbreak of the war. During this period, many raised questions about how startup sales would be affected by the new reality imposed on us, and there were many question marks surrounding exit processes that began before the war and whether they would actually be signed, for example the purchase of Talon and Security Fishing by Palo Alto. The volume of transactions and the price that the companies received in each transaction brings a tailwind to the industry and if there is no change, it seems that the wave of sales will continue into the year and even intensify.
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