JERUSALEM (Reuters) – Israeli institutions invested $900 million in the country’s high-tech sector in 2021, a five-fold jump from 2020, the Israel Innovation Authority said on Monday.
The rise came after the authority in 2020 sought to encourage more institutional investment in the country’s robust tech industry, which is a key engine of economic growth that accounts for 15% of Israel’s gross domestic product.
As part of its program, the authority has offered a government-backed safety net of 2 billion shekels ($623.5 million) for investments by institutional investors in high-tech companies. They are compensated up to 40% of their investments in high-tech companies made after seven years in the event of a negative return.
Burned by the tech bubble that burst in 2000 and hobbled by regulatory constraints, Israeli pension funds and other institutions have since moved away from high-tech, in which billions of dollars have been generated through buyouts or large IPOs.
Most investments in Israeli tech companies are foreign.
Nine institutional investors participate in the program and are entitled to downside protection on their investments in high-tech companies in their early stages of growth and sale.
The authority said the number of deals in which institutional investors were involved rose to more than 120 in 2021 from 34 in 2020.
“While institutional investors have diversified their portfolio in 2021 across various tech verticals, they tend to focus primarily on deep tech and fintech,” he said.
He added that they have developed investment sub-committees, hired new analysts and created collaborations with experienced and wealthy angel investors.
The participating institutions are the insurance companies Clal Insurance and Finance, Menora Mivtachim, Phoenix and Migdal, the investment branches of Hapoalim, Leumi, Mizrahi Tefahot and Discount and More Investment House banks.
($1 = NIS 3.2079)
(Reporting by Steven Scheer, editing by Ed Osmond)