May 20, 2019

Israel's startup IPO drought is finally coming to an end

Dozens of Israeli startups are set to go public this year, creating a new batch of multi-millionaires

Orr Hirschauge

4 min read

It’s not just mammoth US tech companies going public this year.

A group of blockbuster Israeli start-ups is also getting in on the action. Last week, gig marketplace Fiverr filed to go public on the New York Stock Exchange. Sources tell Sifted that data recovery firm Zerto is also plotting a public listing.

Both companies, which declined to comment for this story, are aiming for a valuation of more than $500m, according to those same sources.

True, this valuation is a far cry from the multi-billion numbers for Uber, Lyft, Pinterest, Slack, WeWork and Palantir – but it is still set to mint a new set of multi-millionaire Israeli founders. Co-founders Micha Kaufman and Shai Wininger are principal shareholders of Fiverr, according to the company's prospectus.


And while there are worries about the performance after the dire Uber listing, it has also created a fresh buzz in the Israeli start-up world.

"There was a bit of a draught for technology IPOs coming from Israel, but we're seeing now a real resurgence," says Joshua Kiernan, a capital markets partner at law firm Latham & Watkins.

After peaking in 2014 with 17 IPOs that garnered $2.7bn in proceeds, Israeli tech IPOs waned in the last four years, according to a January report by Tel Aviv-based market research firm IVC and Israeli law firm Meitar Liquornik Geva Leshem Tal.

Between 2015 and 2018, only 6-12 Israeli tech and life science companies went public annually, with average aggregated proceeds of $179m.

Last year saw only five Israeli life-science companies listed on US exchanges, and three more small-cap firms listed in Australia, compared to 95 firms acquired through M&A and buyouts, suggesting that the exit route of floating on the stock exchange was dropping out of favour.

But there has been a return of the public listing this year. Information security company Tufin Software led the way last month, raising $108m, with a post-money valuation of $408m, on the New York Stock Exchange.

Others, like Fiverr, are expected to follow, with higher valuations. Kiernan from Latham & Watkins says that in 2019 he expects to see three more IPOs by Israeli companies looking to raise $100-$200m with valuations of $500m to $1bn. He also sees "a very nice pipeline for next year."

One of the challenges is that most of these tech companies are looking to list in the US, and there the market dynamics means investors are mostly interested in very large public listing, making smaller ones harder to get away.

Based in London, Kiernan has been involved with tech IPOs in Israeli for twenty years. Five years ago, he says, Israeli companies with annual revenues at times lower than $60m could raise $50-$90m on US exchanges with valuations of around $400m.

Nowadays, firms "can't really IPO in those sizes, so companies are waiting longer, and getting bigger."


Fiverr, which is headquartered in Tel Aviv, reported last week that revenue had grown 45% to $75.5m in 2018. The company saw its net losses grow from $19.3m to $36.1m in 2018 as well.

Rubi Suliman, a high-tech leader at PwC Israel, says that he sees more public offerings around the corner following the Tufin listing. The deal, he says, may have "opened the door for more Israeli companies to follow."

Mike Rimon, a partner at law firm Meitar, agrees: "There's now more openness to go for a dual track which may end in an IPO or an M&A deal. That's a change—until recently Israeli founders were very focused on M&A deals.

There's a straightforward correlation between what happens in the US, and what happens here.

"The challenge for companies such as Fiverr, Zerto and others are what the markets are going to do for the rest of the year. There are some concerns that weaker than the expected IPOs by the likes of Uber, and fears of the impact of a trade war may turn the market sour.

"There's a straightforward correlation between what happens in the US, and what happens here. It's the same investors, and market appetite is a strong factor," says Suliman.

The market appetite for certain specific sector will also make a difference. Some of the biggest and most profitable private Israeli firms are in the ad-tech business, and the sector may be facing headwinds when it comes to going public.

"Bankers are negative on ad-tech—competition is fierce, and big players can easily get in your way," says Adam Fisher, a partner at Bessemer Venture Partners.

Two things need to happen for the rekindled interest of Israeli tech firms in capital markets to last and become a trend, according to Rimon: "American markets need to remain stable, and we need one or more examples of successful IPOs."

Steven Schoenfeld is the founder of BlueStar Indexes which underlie two ETFs with a focus on Israeli firms.

Over the last 18 months, he has seen some of the biggest cap firms on the indexes plucked by bigger corporations and delisted, and hardly any companies coming on.

He is now cautiously optimistic. "People feel that the window is open. When companies see other Israeli firms coming to the market— it can give them a kick in the tuches. I just hope they are not too late."