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Quarterly Digest Israeli High Tech Market

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Quarterly Digest Israeli High Tech Market Quarterly Digest Israeli High Tech Market (4th Quarter, 2013) 1 Contents Introduction 3 Report methodology 3 The trends 6 Public Market reopened for Israeli tech companies 6 IT and Mobile are the engines of the local industry 7 Enterprise software is an old-new superstar 8 Chemical industry and new materials 9 R&D centers of multinationals – from Facebook to unknown insurance company- everybody wants boots on the ground 10 Source of technology for Asian giants 10 Future trends – modest prediction attempt 11 Fundraising during Q4 12 IT 12 Biotech 15 Medical technologies 15 Engineering 18 Energy efficiency & clean-tech 19 Mobile 20 IPO Pipeline 24 M&A Deals during Q4 25 IT 26 Medical Technologies 26 Engineering 27 Mobile 29 Investment and Venture Capital in Israel 30 Technologies 37 IT 37 Medical Technologies 37 Mobile 38 Significant trade transaction and other related headlines 40 IT 40 Mobile 42 BioTech 42 Companies of special interest 43 2 Introduction Introduction This digest is an overview of the high tech industry, venture capital and adjusting areas news line of Israeli Hebrew written press and blogs. The main purpose of it is to present an unbiased picture of what is happening on one of the most vibrant technology markets. Usually, every technology start-up is trying to be secretive and not to reveal too much. Significant events in the company life (fundraising, M&A, significant trade transactions and contracts) allow the observers to get a picture of the market, to spot trends, to see where the investors (VC funds) are putting their money and what are strategic players after. This analysis will help policy makers, entrepreneurs, VC professionals and academics engaged in technology to understand what the future “hot topics” are and to be up to date with the most relevant industry trends. It will also help to understand when in the company life cycle, there is a right time for investment round, for strategic investor of for complete exit. It will allow technological entrepreneurs to understand who can be valuable partner or buyer for their company or technology or what are the factor of attraction for the VC funds. VC professionals can see what their colleagues are after, to question or adopt their logic and to validate their own investment agenda. Report methodology The report trying to present the news as they appeared however trying also to impose some structure. Since it’s the first digest of this nature, we are still experimenting with the format and will appreciate comments and suggestions from our readers. In terms of structure, we split the news line into the following major topics: Fundraising (either on stock exchanges or from VC funds) M&A (acquisitions of companies , mostly by a leading player in the sector) VC related news Technologies 3 Report methodology Companies of particular interest for Russia Within each of the topics above (where it’s relevant) we added additional split into subsectors: IT Mobile Biotech Medical Technologies Energy efficiency & Cleantech Engineering The opening part of the report presents several trends that we identified. It quite possible that an educated reader will be able to pick additional technological trend or derive a different conclusions based on the same data, again, we will be happy to learn and discuss. This digest means to be a tool for review, discussion and learning. 2013 – A Good Year for Israeli Tech Sector and Q4 Is Not an Exception In 2013 the Israeli high technology market have experienced a year of prosperity with a large number of M&A deals and a record breaking funding which have been invested in Israeli companies. Since exit is the culmination of the corporate life cycle, it’s worth to mention the most noticeable acquisition/exits of 2013: Waze, a mobile navigation app, acquired by Google for close to $1.1bn in June 2013. Waze services have been implemented in Googles navigation services, with special consideration of traffic information. Trusteer, an IT security company, has been acquired by IBM for $650M in September 2013, making it the largest acquisition of IBM in Israel yet. The investors of the company multiplied their investment by a staggering 65 times. PROLOR, a developer of biological medications ingredients, has been acquired by Opko Health for $480M during April 2013. Dr Phillip Frost the chairman of Teva Pharmaceuticals (NYSE and TASE) is the CEO of Opko and a major shareholder in PROLOR. 4 The trends Intucell, a developer of technology for improving cellular network data transfer, have been acquired by Cisco for $475M during January 2013. The acquisition of the company represents a $471M profit on the investment of only $6M. Scale IO, developer of server side storage software, was acquired for $300 by EMC making it second EMC acquisition in Israel within a year (in May 2012 EMC paid $430mn for Xtreme IO, another Israeli company engaged in storage solutions development). 5 The trends The Trends Public Market reopened for Israeli tech companies All totaling at $4.9B until the beginning of Q4 2013 with an impressive list of Exits during Q4 some by acquisition and some by IPO. Israeli high tech companies have raised a total of $1.6B during 2013 in the US stock markets, by IPOs, seasoned offerings and more. The raised amount is record high since 2007 (with $1.8B raised) a positive sign for the local high-tech industry after the credit crunch of 2008. This year only 12% of the amount raised was by technological companies and Biomed companies raised 23%. 22% of the amount raised came from IPOs in the American stock market, if eliminating Kamada and Mazor Robotics that were already traded in TASE (Tel Aviv Stock exchange), IPOs stand for 15% of the funds raised. The following list contains the technology and biotech companies that raised on the US stock markets1: Amount raised Month of the Return of the The company millions of raise stock Dollars Symtron 3/13 15.1 27.2% Micronet Enertec 4/13 9.3 -14% Symtron 5/13 15.7 6.9% Symtron 8/13 6.2 11.3% Arotech 9/13 6.9 12% Wix 11/13 127.1 4.8% Keryx 1/13 69.9 53% Biopharmaceuticals Medgenics 2/13 31.9 27.8% Inspire MD 4/13 25 50% Alcobra 5/13 25 106% Kamada 5/13 59.4 63.5% Enzymotec 9/13 71.2 56.6% Alcobra 10/13 38 -0.1% Mazor Robotics 10/13 46.9 11.1% 1 http://www.globes.co.il/news/article.aspx?did=1000893435 6 The trends Q4 brought with it the most notable of the recent Israeli activities on the US stock market, an IPO of the Israeli website building platform WIX, with more than $127M raised on the NASDAQ stock exchange. The IPO comes after a sharp rise in in the Income of the company from $9.9M in 2010 to $43.7M in 2012 and 55.53$ during Q1-Q3 2013 from its 680,000 paying customers (according to the company) and more the 37M users worldwide. Although the company have achieved significant rise in its income it have yet failed to become profitable, with a net loss of $17.802M during Q1-Q3 2013. The company operates a development center in Israel and Ukraine. (Dnepropetrovsk) The IPO represents a total valuation of $765M to the company representing a decent return for the investors which have invested $41M since WIX inception during 2006. The main investors of WIX are Mangrove capital Partners which holds 22.5% of the company and Bessemer venture partners with 21.7%. The underwriters of the IPO were JPMorgan, Merrill Lynch and RBC along with Needham & Company2,3. The return of the IPO on major stock exchange as NASDAQ carries not only additional exit opportunities for VC’s or some paramount for the entrepreneurs to aspire, but it has a big psychological effect on the market as a whole. Every document or presentation about Israeli high tech industry proudly mentions the high numbers of Israeli companies on NASDAQ. NASDAQ is not only source of financing but also kind of badge of honor and mark of global recognition. That is why the reopening of it carries added psychological value for the Israeli market. This IPO will also add some confidence to other Israeli companies that are contemplating their IPOs on NASDAQ like Outbrain that just completed a round of pre IPO financing (see item on below) and has $1bn IPO ambitions for the next year. (Please see below on additional companies planning to take this route). IT and Mobile are the engines of the local industry There were also no surprises as for the focus areas of the local industry. Traditionally software development was very strong side of Israeli industry while new materials and chemical engineering where less impressive due to the absence or almost absence of the supporting industries. An IT sector (which is very wide definition though) was very 2 http://www.globes.co.il/news/article.aspx?did=1000891936 3 http://www.themarker.com/technation/1.2158168 7 The trends colorful including IT solutions that shall be considered clean-tech (water and energy saving), homeland security (big data analytics of marine vessels movements, that helps to catch weapons trafficking and similar). Additional and not surprising observation is a strong presence of mobile (that we decided to separate from IT to a special category because of its significance) (see chart below). Enterprise software is an old-new superstar Interesting trend that we can spot, and was confirmed in the background conversations with market practitioners is the massive return of enterprise software sector.
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