At a webinar to mark the occasion on new investment options for high tech firms, held by accounting firm Fahn Kanne & Co. Grant Thornton Israel and the Pearl Cohen law firm, Fahn Kanne Consulting CEO Shlomi Bartov said, "The entry of institutional bodies and their investments in high tech companies continues to grow and in the next 18 months, we expect to see between 50 and 100 major deals.
Such a volume of deals in the market can be translated into an increase of 20% in deals, and according to the data that we have gathered, we see that there have been about 250 investment deals by bodies in early stage high tech companies.
The test will come over the next 18 months on the assumption that the institutions can formulate for themselves the work methods and the direct investment in high tech companies."
The webinar dealt with the opportunities now available to Israeli technology growth companies and procedures for capital raising, and included the exceptional cooperation between the institutional bodies in Israel.
The Israel Innovation Authority, Ministry of Finance, Capital Market Authority and Israel Securities Authority recently launched the Benefits Program No. 43 to encourage the investments of institutional bodies in Israel in high tech companies, as part of which 10 institutional bodies were chosen, which will invest NIS 2 billion in these companies, while the state will provide guarantees to protect 40% of their investments.
Fahn Kanne & Co. Grant Thornton Israel accounting firm partner Nir Yenni said, "The unequivocal aim of the benefits track is to help the growth of Israeli high tech in the short and the long term. The aim is that the institutions will deepen their investments in high tech and will become relevant and have expertise in the sector.
We are talking about a groundbreaking development. For the first time on a national scale like this, the combination of institutions in direct investments in Israeli high tech is being encouraged. We are already seeing a renaissance of companies in the field and major interest by our clients in these investment options, including supporting companies registering for the new TASE UP trading platform, which does not require a prospectus and is not subject to the Securities Authority Law."
Pearl Cohen law firm senior partner Adv. Anna Moshe said, "The entry of institutional investors changes the rules of the game. On the one hand, they are injecting additional capital, and on the other hand the regulatory restrictions, which do not allow the institutions to oversee or intervene in the management of the target companies - will change what is acceptable in investments like these. These are not venture capital fund investments or angels. This is a completely new alliance that requires assessments on various issues, such as executive liability insurance.
In my opinion, the TASE UP platform will raise the visibility of the best privately-held companies and the amount of investments, without the heavy expenditures that are incurred by listing for trade and first and foremost publishing a prospectus and keeping all the obligations required by a reporting corporation."
Adv Moshe explained: "It is important to point out that the TASE UP allows the public, through the pension funds, to take part in the boom in publicly traded high tech companies, which until now were limited to venture capital funds and angels and we can assume that we will see additional companies listing for trade. However, we are talking about a new arrangement and there are questions that need to be thought about here as well such as issues of reporting and the sharing of relevant news with shareholders even if there is no requirement to report, reporting to the rergistrar, certain terms regasridng the blocking of securities from trade and other developments."
TASE EVP & Head of Listing & Economics Department Hani Shitrit Bach said, "The coronavirus crisis has on the one hand helped high tech companies while raising awareness for tech and biomed companies. American investors at the start of the crisis halted investments outside of the US, so that investments in Israeli high tech company declined, and at the same time Program No. 43 brought the institutional investors into the game, and opened up demand for investment in local high tech companies." Shitrit Bach added, "2020 has been the best year since 2007. By the end of the year, about 30 new companies would have listed for trading and conducted an IPO on the TASE, of which 19 are high tech companies, and the total amount raised so far is NIS 4.5 billion, and the value of the new companies is about NIS 18 billion."
Psagot chief investment officer Gat Megiddo spoke about the advantages of investments by institutional bodies in high tech, "An institutional body is always a financial partner and cannot receive a chair on the board or influence management of the company, except through principles of corporate governance and general meetings. This makes us an excellent partner and in line with venture capital funds, who frequently do not want to bring in other dominant funds."
As for the criteria that interest them in the companies, she said, "We are looking for companies cthat were founded by serial entrepreneurs, which can present revenue. The areas in which we will invest have to be large and attractive with major potential for growth. Thew main areas that we are interest us for investment are B2B software, fintech, digital health, agtech, and food-tech. No small number of our plans will be invested in sustainability, we are studying climate issues and the opportunities created with investment in the ESG sector and we have already been leading it for years."
Discount Capital head of technology & fintech investments Ran Dagan, spoke about the investment process that the company is undergoing. "There are numerous companies that are embarking on capital raising rounds. Sometimes it is recommended to meet with the investor many months before the planned financing round, in order to be able to get to know the company and speed up the process, in terms of the future when the company actually goes out on the planned capital raising round. The ability of the company to plan ahead is important for the investors but no less important for the companies.
We as professional investors look ahead to the day after Program No. 43 and we will be interested to support our portfolio companies, even after the next 18 months, and we recommend that companies consider parameters such as this, when examining potential investors."