Israeli Financing Trends In 2020 For Growth Companies

• Published date: 01 October 2020
• Subject Matter: Corporate/Commercial Law, Venture Capital, Corporate and Company Law, Securities
• Law Firm: Yigal Arnon & Co
• Author: Mr Avi Anouchi, Daniel Marcovici, Maor Alev and Shai Margalit

Notwithstanding the global COVID pandemic, 2020 is proving to be a record breaking year for Israeli growth companies. While in North America high tech investment is down 10% compared to 2019 and in Europe almost 20%, in Israel there seems to be a 40% increase over the first half of 2019. Israeli growth companies raised about $2.5 billion in Q2 and just this past August, growth companies raised $612 million from 19 different funding rounds in what is usually a slow month in the industry. The above data is hard to explain but what is imperative is that Israel including Israeli policy makers are working very hard to stimulate the economy during the midst of an unprecedented international recession. There are several new methods of financing available in the industry which are already or will soon be available to Israeli growth companies. This includes regulations to stimulate crowd-funding which were enacted in 2018 and have led to a significant increase in Israeli growth companies exploring crowdfunding models. Another notable new initiative is called TASE UP, a new program was very recently launched by the Tel Aviv Stock Exchange and will hopefully provide additional sources of capital for R&D companies. Lastly venture lending which has been active in the Israeli market for over a decade, is gaining a resurgence of popularity and has encouraged many growth companies to explore this as a feasible funding model.

Crowdfunding

At the beginning of 2018, securities regulations came into force, which constitute the Israeli crowdfunding model. According to the Israeli model, a private company may issue shares or bonds to the general public, without limitation on the number of offerees, subject to compliance with the conditions specified in the regulations. The main conditions refer to the maximum amount to be raised and the maximum amount to be invested by a single investor. A company may raise up to ILS 4 million every 12 months under this model, and this amount may increase up to ILS 6 million subject to certain conditions.

As for the amount that may be invested by any single investor the regulations stipulate that an investor may invest in a specific investment up to ILS 10,000 and every 12 months a total of up to ILS 20,000. The maximum permitted investment for an investor is contingent on his/her income level. For example, an investor whose annual income exceeds ILS 355,000 may invest up to ILS 30,000 in a single investment or in several investments over...