Israeli Fintech companies raise $2.3 billion in the first half of 2021

2021 is turning out to be a record-breaking year for the Israeli Fintech sector.

By Daniel Farber-Ball, Calcalist

2021 is turning out to be a record-breaking year for the Israeli Fintech sector, according to a Start-Up Nation Central report released Monday. The report found that even though 2021 just passed its halfway-point, in terms of venture capital investments it is already displaying historically strong numbers.

The report revealed that Israeli Fintech companies raised $2.3 billion in the first half of 2021, representing a staggering 260% increase over the same period last year, and even surpassing the 2020 full-year total of $1.8 billion by 28%. Furthermore, investments in Fintech made up 19% of the total funding in Israeli innovation technology companies during the first half of this year, amounting to $12.2 billion.

Why Israel?

“People are looking to Israel, the technology is respectable, the fact that we surpassed last year’s annual funding in May shows there is attention and dollars coming this way,” Start-Up Nation Central FinTech Analyst, Nicole Krieger, told CTech.

“Within Israel, there is a lot of activity, for example, this year Apple Pay came in, there is a big push for EMV terminals across all establishments, the central bank is looking at introducing a digital currency, so when talking about the Israeli person, day-to-day domestically, given that there is so much taking place within Fintech around the world and with the success of Israeli companies, the game is being upped locally as well.”

The total number of fundraising provided additional proof of investors’ interest in Israel’s Fintech sector. A total of 68 rounds were secured halfway through 2021, closing in on the 2020 total of 74. An increase in the number of Seed rounds, 26 in 2021 so far, compared to 18 in all of 2020, and in C+ rounds, 15 this year versus 13 in all of 2020, indicates that the mature sector, still has plenty of room for newcomers. And as for mega-rounds (investments of more than $100 million) 2021 has already seen seven companies raise nine-figure sums, compared to only five throughout all of 2020.

The first half of 2021 also displayed a strong momentum for big plays. Seven acquisitions, one IPO, and one SPAC merger completed in the Israeli FinTech sector are on a path to surpass 2020’s eight acquisitions and one IPO. ”Covid-19 drivers aside, Israeli Fintech companies have grown rapidly and globally, building commercial partnerships and contributing significant technology to payments and enterprises,” Krieger stated.

Where did the funding go?

It is important to note that over the past two years, 70% of the Israeli Fintech funding was funneled into three subsectors: payments, anti-fraud and insurtech. This trend has continued in 2021, with payments retaining the top spot, comprising 35% of funding and “growing by 68% above last year’s investment into that sub-sector,” according to Krieger.

The demand for online payments skyrocketed during Covid restrictions, and providers like multi-currency mobile wallet Rapyd ($300M Series D), eCommerce fraud prevention company Forter ($300M Series F), and supplier payment platform Melio ($110M Series D) were well-positioned to benefit from the new reality.

The first half of 2021 also saw investment growth in enterprise solutions, “62% above last year, according to what we have seen.” This new demand was largely spurred by the pandemic-induced rush for corporate innovation which created an opportunity to modernize legacy processes.

When asked about what trends will continue to grow in the future, Krieger said that “we think that payments will continue, now that the capabilities are there it is likely to be improving efficiency, so doing things faster and setting the stage for other industry standards. Something else we see emerging is the crypto space.”

Investment in IsraelIsraeli startupStart-upStart-Up Nation