Is 2021 the Year of the Israeli Startups?

Payoneer and WalkMe Go Public – Will Other Israeli Startups Follow?

Israeli startups Payoneer and WalkMe are ushering in 2021 with announcements that they will be having Initial Public Offering (IPO) listings on the U.S. NASDAQ exchange.  Payoneer, a fintech innovator, and WalkMe, which provides digital solutions to simplify access to websites, have estimated market valuations of USD 3.3 Billion and USD 4.0 Billion respectively.

 

These startups represent a robust start to 2021, following a challenging year during which Israel went from having the highest infection rates globally in the middle of 2020 to the most effective vaccination program in January 2021.  Despite the dramatic circumstances created by the COVID-19 pandemic and the resulting strain on world economies, Israeli high-technology companies continue to not only keep up, but set the pace.

 

Are the highly-anticipated Payoneer and WalkMe IPOs harbingers of Israeli start-up trends for the coming year?  Will more Israeli startups go public as independent companies? Or will a greater number of these startups serve as attractive acquisitions by giants like the U.S. companies of Google and Intel?

 

The Startup Nation Leads the Way

The term “Startup Nation,” derived from the book of that title by Dan Senor and Saul Singer, is increasingly validated by Israel’s dramatic hi-tech growth. Since the 1990s, Microsoft, Google, and Samsung set up Research and Development (R&D) centers all over Israel, eager to benefit from Israel’s innovation.

 

Acquisitions and IPO activity in Israel have seen an upward trajectory in recent years.  According to Techcrunch, funding for Israeli startups has increased 400% in the last decade.  In 2019 alone, funding for entrepreneurs rose 30% and Mergers and Acquisition (M&A) activity increased 102%.

 

In spite of the emergence of COVID-19, according to the  Israeli Tech Review, 2020 saw record-breaking USD 9.93 billion in funding, which rose 27% year over year.  However, because of the pandemic, M&A activity was stalled. There are predictions that M&A will rebound in 2021 as vaccinations become more widespread and restrictions are lifted.

Acquisitions Versus IPOs

The return of M&A activity in Israel may provide profitable solutions for startups that do not necessarily aim to go public.  One of the most successful Israeli takeovers was Waze by Google for USD 1 Billion in 2013.  Israeli companies have traditionally contributed their technology to tech giants or participated in acquisitions rather than going it alone.

 

For instance, every major semiconductor company has a presence in Israel, and Israeli startups have contributed to their innovative solutions.  In spite of the technical ingenuity characteristic of Israeli startups, there is as yet no major semiconductor company originating in Israel.  Instead, Waze was purchased by Google, while Mobileye, a leader in autonomous-driving vehicles, was bought by Intel.

 

With news of the Payoneer and WalkMe IPOs occurring so quickly in succession right after the new year, one may ask this question:  Will more Israeli startups go the IPO route or will more seek to be a takeover target of a larger technology company?  As Golan Hazani of Calcalistech commented, “Unlike a slew of other Israeli companies that have chosen to merge with a SPAC (Special Purpose Acquisition Company), WalkMe has chosen to enter Wall Street through the front door.”

 

Investing in Israeli Stocks

Payoneer and WalkMe IPOs will create more opportunities for investors to buy Israeli stocks on the NASDAQ exchange.  This is terrific news for investors who are seeking a diversified portfolio of Israeli asset classes, including individual stocks, bonds, and Exchange-Traded Funds (ETFs).

 

One of the best ways to invest in Israeli stocks is to do so through The Jerusalem Portfolio (TJP).  TJP is an Israel-focused investment portfolio containing fractional ownership interests in over 100 Israeli public companies through a professionally managed portfolio of ETFs. To find out more about The Jerusalem Portfolio, contact us today.