When the cards are revealed, investors will be privy to a slew of data evidencing growth and change in 2021. Venture investors manage only 2% of institutional assets globally, but in 2021, the asset class is on track to have invested $580b, nearly 50% more than was invested in 2020. This influx of capital meant that even new sectors were funded to scale this year. This growth was interspersed through almost every element of the Israeli high-tech ecosystem, and as a part of that, iAngels, too.
2021 in Numbers:
- 13 profitable exits in 2021, including 2 IPOs
- iAngels participated in 56 Financing Rounds
- $1.02b raised by iAngels portfolio companies
- iAngels Digital Assets gross performance YTD: 183%
We secured a successful, final close of our first institutional, early-stage fund, iAngels Ventures, raising $55.5m with an anchor investment from the European Investment Fund (EIF), and grew firm-wide assets under management 80% year-over-year. Commensurate with the growth in the broader industry, the average pre-money valuation across all rounds of the entire iAngels portfolio in 2021 stood at $460m vs. the previous year’s $49m, and the median was $100m vs. $26m in 2020.
The Inflationary Seeds Have Blossomed
We’re living through the golden age of Israeli high-tech. With the effects of broader macro forces generously spurring the fortunes of Israeli startups throughout 2021, the ecosystem took yet another step forward. What was once a small-scale model of Silicon Valley, has matured into its own right, quickly nipping at the heels of the Bay Area whilst exhibiting its own idiosyncrasies and flavors.
As abundant capital seeks returns in an inflationary environment with near-zero interest-rate policies, valuations are pushed further as the discounted potential value of a startup decouples from traditionally-accepted norms, clearly evidenced by global, early-stage median valuations rising $53m, a substantial jump from last year’s $30.5m.
In Israel, deals increased, valuations followed, and not far behind, increasing amounts of dry powder. In this milieu, Israeli venture funds competed over the best entrepreneurs side-by-side with local as well as international funds. Looking into the future, venture funds realize that companies are debuting on global exchanges as a vehicle for raising capital while continuing to focus on scaling to further heights. Fund models are supporting this shift by allowing the fund, upon maturity, to transition from VC to hedge-fund. This past year, Sequoia demonstrated this model, while the iAngels investment house model has this approach built in, investing from seed to IPO and beyond.
Companies, once early-stage startups, have reached a level in which corporate-strategy offices are playing an ever-larger role, with M&A’s skyrocketing to $9.5b in total value created. Even more interestingly, 30% of 86 M&A transactions occurred this year where both sides were “blue and white”—both buyer and seller were Israeli. Voyage81, an iAngels portfolio company, is an example of this trend as it was acquired this year by Il Makiage, a multinational makeup brand on a mission to provide more customer value through technological adoption.
Another second order consequence of the Israel tech boom is the talent crunch. The ever growing need for more talented employees and the competitive employment landscape has challenged founders to retain talent and fill open positions. Ultimately, forcing a need to raise additional capital to meet salary expectations and rework options models to attract the best. Adding to this, newly-minted startup millionaires are 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. Alongside our portfolio companies, we observed this change which will continue into the years to come. If you’re an employee, it’s a job-seekers market. If you’re a startup, it’s a entrepreneurs’ market, and if you’re a venture fund, you have to be able to act in a market where valuations are high but the potential is higher. The Decacorn is the new Unicorn.
With so much capital floating around, prominent investors seized an opportunity to raise a SPAC in 2020. SPAC sponsors, operating under a two-year time constraint to find a target, and Israeli founders, looking to deliver shareholder value, saw in each other a match made in heaven. While several strong founders were able to navigate this vehicle’s economics, others decided to hold as the SEC defines how the structure will be reviewed. A benefit to retail investors was the ability to invest in companies that would have otherwise not been public, thus providing a price-discovery mechanism for countless tech companies. iAngels witnessed this up close as two of our portfolio companies chose this route. One, Arbe Robotics, the company bringing 4D radar to the semi and fully-autonomous vehicle space, and the other, eToro, the social-trading giant, slated for debut early next year.
While it has been an incredible year for us as a firm, it was not without its challenges. On an operational level we dealt with volume that was unmatched, concurrently ramping up the iAngels team. iAngels participated in 56 transactions in both new and follow-on rounds, more than double the prior year, and led 7, up from 4 last year. From SPACs to acquisitions, we witnessed 13 profitable exits versus 4 last year, an auspicious sign that our portfolio is maturing from young startups to attractive acquisition targets.
Trials, tribulations, and novel solutions
This year, the sectors we have been investing in, took on new independence and global recognition. Foodtech, a prime example of a sector that was once a niche, is now its own vertical currently enjoying profound tailwinds. The current makeup of the food industry, unsustainable from both a health and environmental perspective for tomorrow’s population, has a large enough Total Addressable Market to offset any near-term, supply-chain pressures where everything from ingredients to shipping costs saw price inflation this year. Israeli-venture investors recognized this secular growth and plowed ~$480m into the foodtech and agtech space in just the first three quarters of the year, including three of our companies—InnovoPro, providing an innovative solution for protein made from chickpeas raised a B round; Amai Proteins, the creator of computational protein-design that replaces sugar with protein opened an additional SAFE to satiate demand; BeeHero, who are on a mission to save our planet from an ecological armageddon by increasing crop yield and quality while enhancing pollinator health, and Better Juice, a technology to reduce sugar in beverages, raised an oversubscribed seed round.
The abounding problems in the world are not merely reflected in the way society eats or produces food, such hindrances extend to humanity’s approach to climate change. The world’s consumption of non-renewable resources backdropped by inopportune unit economic costs of current renewable solutions fails to push forward solutions to this issue. Whilst western governments have begun to fill the gap of demand, the private sector holds a responsibility to effectuate a proper supply. As early investors in H2Pro, iAngels plays our part together with Talmon Marco and his venture to bring renewable, green hydrogen to the market at a fraction of the cost. This year, he declared the company will be able to deliver hydrogen at $1 per kilo within the decade.
Digital health, another space that has commanded our interest for the last 8 years, garnered a more zealous focus in 2021 as the world dealt with the backlash of COVID-19 and technology became key in how we manage our health. iAngels led the C round of Binah.ai, which is combining AI and signal processing to allow measurement of vital signs with just a smartphone or laptop camera. And, what has now grown to the largest position in the iAngels Ventures fund, Immunai—having mapped the immune system to transform immuno-oncology through discovery of targets and eventual drug development—raised a C round last quarter officially becoming Israel’s latest unicorn.
Pioneering crypto-designated investments in Israel, iAngels Digital Assets has more than tripled its AUM, primarily due to appreciation of the fund as we compiled a dedicated investment team that achieved triple-digit returns this year. As well, we brought a panoply of late-stage crypto deals to our platform, iAngels Capital. The team was able to secure spots on the cap-tables of some of the biggest names in the space—Ledger, Consensys, and Anchorage Digital. With the fund now open to new investors, we’re excited to leverage the exponential growth of the digital-asset space for the benefit of our LPs in the face of a changing landscape. The digital-asset market has undergone a transformation, as we are now seeing real use-cases and applications being brought to market and taking crypto mainstream. As blockchain technology matures towards becoming infinitely more scalable, we expect this trend to grow exponentially. Further, traditional companies are diversifying to it as evidenced by the acquisition of iAngels’ portfolio company, Simplex, a crypto on-ramp processor, that was purchased by a more traditional payment-technology provider, Nuvei. From DeFi (decentralized finance) to the Metaverse, the dynamics have changed, and with it, the potential for digital assets to remake the manner in which many sectors execute business, art is owned, and games are played.
Lastly, as in all industries, there is a mismatch between women in leadership roles and the amount of women working in the ecosystem as a whole. In 2021, we have seen improvement in this as well with more women and minorities in leadership roles in the tech ecosystem. iAngels continues to invite inclusion across the board. This year we invested in 7 startups with women in leadership roles and additionally have established Kamatech’s second fund, 12Angels, dedicated to helping ultra-orthodox Jews integrate into Israel’s high tech scene.
Where we’re going, we don’t need roads
While the SEC is considering widening the accredited investor definition, we believe this sentiment will proliferate to other regions, as the venture scene is growing in accessibility, liquidity, and allocation. Though there are macro challenges, Israel’s unceasing introduction of technological solutions to both well-trodden global problems and niche markets, leaves us excited for the ensuing year as the world continues to witness what human innovation will bring in the way of technology.
We would like to conclude by saying that we are proud of our growth, results, and partners. As the year turns, we emphasize our appreciation of our LPs for their unwavering trust and look forward to working with our founders to maximize value.
Let’s Venture Beyond together!
Mor Assia and Shelly Hod Moyal, Founding Partners
Sources: The Economist, PitchBook, IVC, PwC