Moran Chamsi

The Road for Investors Back to Israeli High-Tech Begins in the Secondary Market

Foreign investors sat on the fence because of the war, but they now realize that even under difficult conditions, the Israeli high-tech industry is alive and kicking; They are now seeking entry points back into the Israeli market, under conditions that can make the most of the situation and contain the risk.

The current war was the last thing the Israeli high-tech sector needed, while responding to a tense domestic political situation and global financial downturn. With the outbreak of war, many investors sat on the fence, waiting for stability. In recent months, Israel has been in a “wartime routine,” with the fighting focused in the Gaza region and parts of the north. In other areas, the economy is striving to operate almost as usual, especially in the high-tech stronghold of Tel Aviv and its surroundings.

While it initially seemed that the war would impact investments in Israeli high-tech even further, in recent months, there has been an impressive recovery. Israeli technology continues to succeed even under difficult conditions and uncertainty. For example, in April, Israeli companies raised approximately $1 billion in 20 financing rounds – a single-month total not seen in two years. Similar amounts were also seen in exit deals this month, including acquisitions made by Nvidia.

Such expressions of confidence bring foreign investors, especially Americans, “off the fence” and into the Israeli market under conditions that can make the most of the situation and contain the risk. Currently, we see more investors from the US choosing to invest through secondary deals (purchasing shares from other shareholders) in companies in advanced stages, for several reasons:

Investing in mature companies lowers risk levels. Mature companies have significant revenues, and those that weathered the “dry spell” in 2022-2023 have significantly improved their capital efficiency, making them healthier financially and better able to withstand further challenges.

Buying through secondary means ensures investors invest in promising companies at discounted prices. For entrepreneurs, employees, and well-known funds selling their stocks, it’s an opportunity to liquidate funds without waiting years for the anticipated exit, and without publicly declaring lower valuations than the last fundraising. For investors, it’s a genuine opportunity to invest in leading companies at low prices and with contained risk.

Most mature Israeli companies are global companies. Consequently, the influence of local developments is limited, and they are more resistant to local crises. This is another opportunity for investors to contain risk.

Short-term investments – In recent years, Israeli companies have grown into large companies with many employees. The life span of a growing private company until exit has significantly lengthened from 6 years to 15 years, and the companies are raising much more money. Therefore, investors are looking for the opposite, especially in times of uncertainty – they don’t want to be “locked” into an investment. The name of the game today is liquidity, so investors are looking for shorter-term investments: secondary deals in mature companies, closer to exit, are an excellent way for them to shorten the investment horizon.

The Israeli high-tech sector continues to grow and prosper despite geopolitical and economic challenges. Israeli technology proves its resilience and its ability to thrive even under difficult conditions. Secondary transactions are an efficient tool for investment in this market, allowing investors to enjoy the many advantages of Israeli technology while mitigating risks.

Moran Chamsi is the managing partner at the secondary fund Amplefields Investments

About the Author
With over 15 years of experience in nurturing and propelling startups and established organizations, I am a seasoned executive adept at navigating the complexities of business growth. My entrepreneurial streak has been affirmed by successfully leading a private company to an IPO within a remarkable three-year span. Additionally, my investment experience is in spearheading late-stage tech companies in a diverse range of industries. I hold a Bachelor of Arts in Communication and Political Science, complemented by a Master of Laws. Beyond my professional pursuits, I love to mix spiritual and material worlds, hiking and spending time with my family.