Defying Covid-19, VC Funding Of Israeli Startups Accelerates

Gil Press Senior Contributor at Forbes

The numbers for venture capital funding for the first half of 2020 show that the startup nation of Israel has bucked a global downward trend. North American investments in startups were down 10 percent compared to the same period in 2019 and European venture funding is down 20 percent.  The amount raised in the first half of 2020 in Israel, however, represented a 40 percent increase over the first half of 2019. The number of VC deals in Israel reached an all-time record in the second quarter of 2020, in the midst of the Covid-19 pandemic. 

“Leadership is not achieved when the tide is high—it is obtained when a crisis occurs,” says Erel Margalit. “You become a leader when you continue running when others stop running. That’s what Israel is good at.”

According to IVC, the number of Life Sciences investments in Israel is on pace for a record year, with 70 deals in the last six months. Artificial Intelligence startups have raised funds in 100 deals since the beginning of the year and cybersecurity startups benefited from 45 deals over the same time period. VC investors in Israeli startups, both Israeli and foreign (52% of investments in Q2 of 2020 were made by non-Israeli investors) “did not shy away from either first or follow-on investments,” says the IVC report.

Margalit founded VC firm Jerusalem Venture Partners (JVP) in 1993 and has since led it with over $1.4 billion raised and many profitable exits, including 12 IPOs. The Covid-19 crisis has not slowed JVP down and it has invested $300 million in various startups over the last few months. Here are a few (publicly announced) examples of recent funding rounds involving JVP:

$8 million in a seed round for Valid Network which has pioneered a fully automated solution to secure enterprise-grade blockchain business applications throughout the entire lifecycle; $13 million in series A financing for Upsolver, developer of software that eliminates the high engineering overhead of operating data lakes; seed funding of $7 million for OPORA, which uses pre-attack adversary behavior analytics capability to deliver pre-emptive adversary threat protection against specific cyber criminals; $14 million series A round for 1touch.io, providing data discovery, privacy, and security solutions; $7 million in seed funding for Greeneye Technology, an AI platform detecting and spraying weeds in real time; $10.5 million in series A+ funding for Source Defense, providing Client-side Web Security; $21 million in financing for Nanit, developer of a smart baby monitor and sleep tracker; $15 million in series B round for Secret Double Octopus, provider of passwordless enterprise authentication; and $15 million in series B round of funding for InnovoPro, the first company in the world to develop a 70% chickpea protein concentrate, a new, clean-label, non-GMO and non-allergenic source of protein.

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It seems to me that personalization based on data is the overarching theme behind this wide range of investments, developing and selling products and services that allow for mass customization and targeting of individuals’ tastes, behavior, preferences, and even criminal (cyber-related) activities. 

Of course, in the Age of Corona, personalization is a big focus for healthtech or digital health startups and a hot magnet for VC investments. In May, JVP and pharmaceutical giant AstraZeneca launched the PlayBeyondBio program. Nine promising digital health startups, selected from hundreds of applicants, will participate in a six-month fast track mentoring and development program, with AstraZeneca experts advising them in areas of development, regulation and sales, and JVP providing expertise in business strategy and investment opportunities.

Bringing to healthcare, especially community care and home care, the IT practices that have been successful in other sectors is one of the key investment opportunities for VCs in the near future, says Margalit. Another key investment opportunity is cybersecurity—”when people don’t travel, cyber is where criminals roam,” he observes. Other opportunities are food and food security, and fintech—”the financial world needs to become much more personal.” 

Targeted and granular data-based strategies should also inform and facilitate the correct responses to the health and economic crises brought by Covid-19, in Margalit’s opinion. “You need to use big data and technology to pinpoint the places where you need to treat and free up the places which are not impacted by the virus,” says Margalit. In addition, he firmly believes in getting people back into their offices (and last week came to New York City to reopen the JVP NYC International Cyber Center). “To make big decisions people need to meet you in person and hear you out,” says Margalit.

Last but not least on his list of strategies to overcome the Covid-19 crisis, is the community and the importance of inclusion. “Mayors and governors need to step in when national leaders are weak,” says Margalit, “they need to reopen their cities.”

Above all, as he has demonstrated in his long career as a social entrepreneur, is striving to make a difference in the lives of other people. “We all need a new chapter now and the new chapter should include social impact, giving certain meaning to your life, as financial success is only one dimension,” Margalit sums up his philosophy of making a social profit.