Keeping up the tech-innovation pace, the Israeli institutions have invested $900 million in Israel’s high-tech sector in 2021, a five-fold jump over 2020, the Israel Innovation Authority said.
The rise came after the Israeli authorities 2020 sought to encourage more institutional investment in the country’s robust tech industry, which is a key economic growth driver that accounts for 15% of Israel’s gross domestic product.
Under its program, the authority offered a government-backed safety net of 2 billion shekels ($623.5 million) for institutional investors’ investments in high-tech firms. They are compensated up to 40% of their investments in high-tech firms made after seven years in the event of a negative yield.
Burned by the tech bubble that burst in 2000 and hampered by regulatory constraints, Israeli pension funds, and other institutions have since shied away from high-tech, during which billions of dollars have been generated by high-profile takeovers or flotations. Most investments in Israeli tech companies are foreign.
Nine institutional investors are participating in the program and are entitled to downside protection on their investments in high-tech companies in their early growth and sales stages.
The authority said the number of deals in which institutional investors were involved rose to more than 120 in 2021 from 34 in 2020. “While the institutional investors diversified their portfolio in 2021 to various technology verticals, they tend to focus mainly on deep tech and fintech,” it said.
It added that they developed sub-investment committees, hired new analysts, and created collaborations with experienced high-net-worth angel investors. The Institutions participating are insurance companies and Finance, Menora Mivtachim, Phoenix, and Migdal, investment arms at banks Hapoalim, Leumi, Mizrahi Tefahot, and Discount and More Investment House.