New study finds 164 Israeli companies ready for IPOs

Israel IPO - Initial Public Offering

While much attention has been given to Israeli start-ups sold on to multinational technology companies, there are also a considerable number of growth companies who have built themselves up and are ready to trade publicly rather than run for high-profile exits, according to a new study by IVC Research Center.

Of $2.3 billion raised by high-tech companies’ financing rounds, almost $1 billion was invested in advanced stage companies, mainly life sciences and software technology firms. Koby Simana, IVC Research Center’s CEO, told Calcalist, that “in Israel, there’s lots of investors looking to fund early stage companies, but there’s not enough interest in the advanced stages. But that’s beginning to change, and a number of funds are starting to raise money just for that. It’s a major step that can really boost the high-tech sector in Israel.”

Growth companies, generating significant positive cash flows usually reinvested in the company, don’t frequently pay out dividends to shareholders or offer much stability. However, the interest and high hopes that come with them mean that their share price very often rockets after initial public offerings. An early IPO is counterproductive, however, since investors lose interest in small companies, and it is hard to regain their trust. The IVC report indicates 164 Israeli growth companies, employing an average of 100 workers each, are now ready to launch IPOs, raising capital in the region of $20-25 million.

Another interesting result of the study is that while the amount of capital raised by high-tech companies in 2013 - $2.3 billion - was the highest in a decade and second only to the $3.1 billion raised by startups in 2000, the relative proportion invested by Israeli venture capital funds was one of the lowest ever, $546 million representing only 24% of the total investment. Foreign investment funds made up the rest.

Unsurprisingly, the vast majority of the growth companies in the study were based in the center of Israel - the greater Tel Aviv area and the Sharon region. A small number were based in Jerusalem, the north and the south. The number of skilled employees concentrated in these areas means it is much simpler to set up a technology firm in the center. The leading sectors continued to be life sciences and software, particularly cloud infrastructure and big data systems. A rising number are working on mobile applications.