* Israeli start-ups raised nearly $5 billion in 2016, up 11
* Auto start-ups raised $681 mln in 2016, nearly doubled
* GM, Daimler, Volvo, Honda have opened R&D centres in
* GRAPHIC: Israeli hi-tech raising tmsnrt.rs/2n3GCTY
By Tova Cohen and Steven Scheer
TEL AVIV, March 22 Intel's $15.3
billion acquisition of Mobileye has catapulted Israeli
hi-tech into the global league, and is likely to stimulate
investment in the sector's other late-stage startups, where
funds are most needed.
Fundraising in late-stage startups - more mature firms that
are already selling products rather than just the bright but
unexploited ideas of entrepreneurs - has begun to increase.
According to the Israel Venture Capital (IVC) Research Center,
it rose to $2.9 billion in 2016 from $2.4 billion in 2015 as
investors search for a higher yield on their investments.
Venture capitalists believe the U.S. semiconductor giant's
purchase last week of Mobileye, which specialises in technology
for driverless cars, should accelerate the trend.
"A concern over the years has been that compared to the
U.S., Israel cannot produce outsized returns," said Adam Fisher,
a partner who manages the Israel office for California-based
venture capital fund Bessemer.
"Mobileye is a perfect example of how a big business can be
built in Israel and how a large corporate will not hesitate to
pay a strategic premium for the business despite its location."
The price was about 21 times Mobileye's expected 2017
revenue, or more than six times more expensive than the
semiconductor industry's three-year deal average.
Until recently, many Israeli tech firms failed to grow
enough to stay independent. Global companies, keen to tap into
the skills of workers trained in the military and intelligence
sectors, often bought them before they floated on the share
market or when they were still small-cap stocks on the Nasdaq
This was the case with Waze, the Israeli map app, which
Google bought in 2013 for $1.15 billion. That same year, Wix
, an Israeli startup which helps people build websites,
made its market debut on New York's Nasdaq, raising $127 million
seven years after the company was founded.
Only a few, such as cyber security firm Check Point Software
Technologies, which has a market valuation of almost
$18 billion, have succeeded in remaining independent. Defence
tech specialists such as Elbit Systems are largely off
limits to foreign investors for Israeli national security
Michael Eisenberg, a partner at the Aleph VC, said the
Mobileye sale signalled to late-stage financiers that they can
expect much more significant returns on their investments.
"It's an accelerant and a belief that there is no glass
ceiling for Israeli companies," said Eisenberg, who also manages
the portfolio of U.S. VC Benchmark in Israel.
Autotalks, a provider of vehicle-to-vehicle communication
for improving road safety, said on Wednesday it raised $30
million in late-stage funding from investors including Samsung's
Catalyst Fund, bringing to $70 million its total raised to date.
Venture capitalists typically seek returns of 3-10 times
their overall investment over time, with those investing at an
early stage expecting a higher multiple than at the later stage.
Long known as the "startup nation", Israel is maturing into
a "scale-up nation", said Steven Schoenfeld, founder of BlueStar
Indexes, which develops indexes and exchange traded-funds (ETF)
that track Israeli stocks.
However, Israelis are largely missing out on their own
success as local institutions shy away from investing in
technology companies, especially those listed abroad. Israeli
institutions, which are typically conservative, tend to stick
with indexes and benchmarks from the Tel Aviv exchange, he said.
Mobileye now accounts for 16 percent of BlueStar's Israeli
technology index. The ETF that tracks the index has gained 13.8
percent so far this year to an all-time high, while the Nasdaq
is up 9.6 percent.
Schoenfeld pointed to software provider Amdocs and
Wix as examples of other companies "going the distance" by
staying independent for longer.
Cyber security firm CyberArk, which is traded on
Nasdaq, is another with strong growth potential.
Mobileye understood it could grow only so much on its own.
The company has expanded rapidly in the two years since its
New York share offering into mapping, systems building and
intelligence of driving.
"All of these take time to build and time to get resources
and Intel already has these resources," said Mobileye co-founder
Amnon Shasuha. "If we want to ... be the key player in
autonomous driving, we need to think about it as an industry and
not as a product."
With more than 200 startups Israel is a growing centre for
automotive technology. Last year startups in the sector raised
$681 million, nearly double the amount in 2015, according to the
Due to Mobileye, car manufacturers and their suppliers have
been "making the pilgrimage" to Israel for the last several
years and met with other startups, Fisher said.
The sector is already enjoying robust pricing for M&A and
the Mobileye deal will continue that, he said.
Potential acquirers "will more likely be the traditional
tech companies that have a declared interest in the automotive
sector rather than car companies themselves, but the latter
wouldn’t surprise me either," Fisher said.
Bessemer has invested in depth sensor technology company
Oryx Vision as well as Otonomo, which developed a connected car
data exchange, and Vayyar, a provider of 3D imaging sensors.
Argus Cyber Security, which has raised $30 million and
collaborates with Qualcomm, is linking the automotive
sector with another of Israel's most vibrant sectors - cyber
security - helping to prevent connected cars from being hacked.
The Mobileye deal, said Argus CEO Ofer Ben-Noon, could
accelerate his company's growth. "There is no doubt there will
be more investments in Israel for automotive, and a lot more
M&A," he said.
Car makers General Motors, Daimler, Volvo
and Honda have all opened research and
development centres in Israel.
Josh Kram, senior director for Middle East Affairs at the
U.S. Chamber of Commerce, noted that about 300 American
companies have R&D centres in Israel, including Intel.
"Now they are moving into the autonomous space and
purchasing Mobileye has catapulted them to the next level," he
said. "It's a win-win for both companies."
(editing by David Stamp)