Jerusalem Post : Israeli startups raise record $4.8 billion in 2016

Israeli startups raise record $4.8 billion in 2016

Amount raised in the fourth quarter was down 8% from the corresponding quarter of 2015.

Israeli high-tech companies raised a record $4.8 billion in 2016, up 11% from $4.3 billion in 2015, the latest IVC - ZAG (Zysman Aharoni, Gayer & Co. law firm) survey has found. The average financing round, which has been constantly growing over the past five years, reached $7.2 million in 2016, 19% above the $5.1 million five-year average.

However, the fourth quarter of 2016 saw $1.02 billion raised in 151 transactions, down 8% from $1.11 billion in 202 deals in the corresponding quarter of 2015, but up 9% from $933 million raised in 140 deals in the preceding quarter. The average financing round stood at $6.7 million in the fourth quarter of 2016, similar to the past two-year quarterly average of $6.6 million.

IVC Research Center CEO Koby Simana said, "As expected, 2016 ended as a record year in Israeli high-tech capital raising. However, despite the higher total amount, it was characterized by a smaller number of financing rounds, along with a higher average capital raising per round. When we looked into the numbers to try and explain the trend, we found what I would call a ‘B Crunch’ - a 30% drop in the number of second rounds closed in 2016 compared to 2015, while the number of earlier rounds slightly increased. This is a troubling trend for the Israeli VC funnel, since the majority of capital goes into later rounds - if there are no companies lined up for later investments, there could be a more serious issue later on."

The IVC-ZAG Survey reveals that, while capital-raising reached new heights in 2016, the number of financing rounds were fewer than expected, with 659 deals closed in 2016, marginally above the five-year average of 657 deals, and 7% below 2015’s record 706 deals. While the number of early rounds (seed and A rounds) increased slightly (5%), the number of B rounds dropped 30% and the number of later rounds - C or higher - was responsible for more than 60% of the capital, down 11% from 2015. B rounds' share of capital raising also decreased, falling from 25% in 2015 ($1.07 billion) to 16% in 2016 ($743 million), while early rounds and later rounds generated more capital and took up larger shares than the year before.

The IVC-ZAG Survey also reveals an upsurge in large deals (above $20 million) in 2016, both in terms of deal number and capital raised - with 76 deals and $2.68 billion, respectively - a 22% increase from the $2.19 billion raised in 68 deals in 2015.


Adv. Oded Har-Even, ZAG-S&W (Zysman Aharoni Gayer & Co. ) partner responsible for its US office, offers a possible explanation, "The increase in capital raising in mid- to late stages could imply a growing use of mezzanine funding in mature companies, gearing towards a possible M&A or IPO (preferably on NASDAQ). If this is indeed the case, then it's a very welcome trend, revealing a mature market considered to be on the ‘quick exit route’ following early stage investments."

Adv, Shmulik Zysman, founding partner of ZAG-S&W (Zysman, Aharoni, Gayer & Co.) agrees, adding: "We expect the uptrend in capital raising activity to continue in 2017, though possibly at slower rates."

Fifteen deals above $20 million reached a total of $573 million, or 56%, of all capital raised in the fourth quarter of 2016. This compares with $430 million (38%), raised in 14 deals in the corresponding quarter of 2015, and $517 million (55%) raised in 18 transactions in the preceding quarter of 2016.

Israeli VC fund investment activity

Israeli venture capital funds invested a total of $634 million in Israeli high-tech companies in 2016, slightly up from $627 million invested in 2015. In the past five years, Israeli venture capital fund investments steadily increased, from $482 million in 2012 to the current level. At the same time, their share of total capital invested has been decreasing gradually, from 26% in 2012 down to 13% in 2016, the lowest yet.

In the fourth quarter of 2016, $111 million was invested by Israeli venture capital funds in local high-tech companies, 44% below the $198 million invested in the corresponding quarter of 2015 and 20% below the $139 million invested in the preceding quarter of 2016. Israeli venture capital funds' share was down to 11% in the fourth quarter of 2016, from 18% and 15% in the corresponding quarter of 2015 and the preceding quarter of 2016, respectively.


Capital raised by sector

Software companies led capital-raising in 2016 with $1.7 billion, up from 2015 when the sector attracted $1.4 billion (32%), also placing first. Internet capital raising has noticeably decreased in 2016, when the sector attracted only $744 million or a mere 16% of total capital, compared with $1.12 billion raised in 2015, when Internet placed second with a 26% share.

Zysman observed that there was a 14% fall in life science capital raising in 2016. "Despite the decrease in life science capital raising in 2016, we remain optimistic with regards to the industry’s potential in Israel, due to three major reasons: the continuous interest shown by Chinese investors, good chances for the return of European and US investors to Israeli life science investments, and Donald Trump's imminent presidency. According to his campaign, Trump is expected to ease price control on drugs and medical services, bringing an optimistic note to the industry, which may increase the appetite for investments, Israel included."

FT : UK income inequality at its lowest since height of Thatcherism

UK income inequality at its lowest since height of Thatcherism
ONS figures highlight difference between perceptions that the wage gap is growing and the data

Income inequality is at its lowest level since the height of Thatcherism, according to official figures published on Tuesday, with jobs growth and low inflation in 2015-16 boosting poorer households’ living standards while earnings for the richest fell.

The figures, which show inequality at its lowest since 1986, highlight the difference between perceptions that the wage gap between the richest and poorest is growing and the data.

The Office for National Statistics published the data on the day the Labour leader Jeremy Corbyn floated the idea, which he later stepped back from, of a cap on high pay. “We cannot go on creating worse levels of inequality,” he said.

The figures are the UK’s most up-to-date income inequality statistics and the first to provide evidence on 2015-16, with a history of more than 50 years. In June, figures based on a larger survey will be published. In the past these have also shown gradually decreasing income inequality in recent years.

Average household incomes for four-fifths of the population outside the richest 20 per cent were all higher in 2015-16 than before the financial crisis after taking inflation into account.

Incomes of the households in the poorest 20 per cent were 13 per cent higher than in 2007-08, while those in the middle of the income distribution were about 5 per cent higher. For the richest 20 per cent of households, incomes were 3 per cent lower on average than before the crisis.

This pattern of bigger rises in incomes for poorer households and drops among richer households has shown up in measures of inequality. The gini coefficient — a summary measure that has a value of 0 if there is total equality and 1 if one household has all the UK’s income — has declined steadily since it peaked in the early 1990s.

Measuring private sources of income alone — wages, self employment income, investment income and private pensions — inequality of “original incomes” was 0.49 in 2015-16, 8 per cent lower than its 1993 peak.
Matthew Whittaker, chief economist of the Resolution Foundation, said the perception gap between the facts on inequality and widespread complaints that living standards are inadequate is explained by the extremely low levels of income growth in the UK since the financial crisis.

Between 2007-08 and 2015-16, the annual growth of average incomes has been less than half the level of Thatcher period and the period between 1990 and 2007-08.

“There’s little comfort to be taken in the fact that inequality has narrowed when everyone is feeling that their living standards expectations aren’t being met,” Mr Whittaker said.

The section of society that has done best since 2007-08 are pensioners, who have had 13 per cent income gains, while non-pensioners have on average seen their disposable incomes fall 1.2 per cent.

The figures also show that the UK’s 5m rural households are richer on average than 20m urban counterparts, with countryside average disposable household incomes of £35,500 and urban incomes of only £32,500.

If experts from the Resolution Foundation and the Institute for Fiscal Studies are correct, 2016 is set to be the last year for some time of falling income inequality, because benefits for non-pensioners are set to be frozen for four years in cash terms until 2020.

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FT : Bovis Homes buyers hit out at quality of new houses

Bovis Homes buyers hit out at quality of new houses
Hundreds of disgruntled customers plan protest outside housebuilder’s HQ


UK housebuilder Bovis Homes has received complaints from hundreds of buyers over the quality of its new homes, increasing pressure on the company whose chief executive resigned on Monday.

The outcry follows production problems that forced Bovis to issue a profit warning in late December, saying completions of about 180 homes would be delayed until 2017. That was followed by the departure of chief executive, David Ritchie, on Monday.

Members of a 650-strong Facebook group for disgruntled customers, the Bovis Homes Victims Group, are planning a protest outside the company’s Kent headquarters this spring.

Marc Holden, a spokesman for the group, claimed his £490,000 home in Milton Keynes had about 100 flaws when he moved in last March, including an en suite shower room that remained a building site and seven separate flaws in the gas supply installation.

“This is happening across the country, and as a group we’re saying we are not going to stand for it,” he said. Other members of the group complained of faults including flooding and faulty electrical installations, as well as slow customer service in addressing defects.

A spokesperson for the FTSE 250 company said: “Bovis Homes is fully aware of the customer group and their complaints, and we take these issues very seriously. We recognise that in some of these cases we have not provided our best standard of customer service and have taken too long to rectify customer issues, for which we apologise.”


Build standards are a long-running issue for the industry. A 2013 survey by the Royal Institute of British Architects found widespread dissatisfaction among buyers of new homes, while MPs last year called for a series of changes including giving buyers the right to carry out a full survey before completion.

Dave Howard, founder of the Facebook group for Bovis customers and the owner of a £400,000 home in Oxfordshire, said he had had an “extremely acrimonious” relationship with the company since he attempted to address build flaws in 2014.

Mr Holden said the problems of some unhappy Bovis customers were linked to a rush to complete before the end of the financial year. Some were offered financial incentives, for example £2,000, to complete purchases before the end of December although building work was ongoing.

Bovis said it had met and apologised to Mr Holden and was in the process of addressing his problems.

In Bovis’s profit warning last month, which echoed a similar one a year earlier, it blamed “slower than expected build production across the group’s sites” for the delay to some completions. It said it would finish 3,950 to 4,000 homes by the end of the year.

The company said a “limited number of customers” had been offered financial incentives “in line with industry practice”.

“All homes were habitable with the requisite CML industry certification, with a timetable for outstanding finishing works to be carried out in the new year,” it added.

Bovis said it set up a dedicated team in November to respond to the ongoing complaints, while “taking actions across all of our sites to put in place robust procedures and practices to prevent issues such as these from occurring again”.

In an annual survey of customer satisfaction by the Home Builders Federation, an industry group, Bovis scored three out of five stars in 2014-15 — but among the 35 builders surveyed it was one of just four that failed to score four or five stars. Buyers of new homes normally have a two-year warranty period in which to report flaws.

Charlie Campbell, analyst at Liberum, said: “If we went back in time 10 or 20 years, it was fairly commonplace to see a rush to get everything done late in the financial year. But over the past decade most companies have been fairly good at moving away from that.

“It’s probably in part because of social media and people being able to grumble about bad experiences more than they did back in the day.” He said Bovis “has a good land bank but historically the problem has been building that out quickly enough”.

WSJ : Snapchat Parent Moves to Book Revenue Where It Is Earned

Snapchat Parent Moves to Book Revenue Where It Is Earned
Messaging company Snap makes London its international headquarters; booking change to boost potential tax liabilities

Snapchat owner Snap Inc. will make London its international headquarters and start booking overseas revenue in all the countries where it has offices, breaking from other tech firms whose headquarters in smaller European countries help them shift profit and lower their taxes.

Snap, which is gearing up for a public offering that could value the company at as much as $25 billion, said Tuesday that it would immediately start booking all of its international revenue in London, where it already employs 75 people. A spokeswoman added that the company plans to shift soon to collecting revenue from foreign clients in any country where it has a local branch, boosting its potential tax liabilities.

Snap currently has foreign offices in Canada, France, Australia and Ukraine, in addition to the U.K.

The designation of the U.K. as an international headquarters is a vote of confidence in Britain’s effort to attract foreign investment after its vote to leave the European Union. Executives at both tech giants and startups had said in the wake of the Brexit vote that they were concerned about their ability to keep hiring EU citizens, but companies including Apple Inc. have since announced London expansion plans. Snap says the size of the U.K. advertising market, and the company’s 10 million users in the U.K., drove its decision.

Snap’s plan to start collecting revenue from clients locally wherever it has an office is the latest sign of how governments, particularly in the EU, are pressuring technology companies to change their tax structures. Traditionally, many companies funneled much of their EU revenue through smaller countries including Ireland and Luxembourg on their way to tax havens like Bermuda.

The EU has proposed new rules to divide multinationals’ profits among EU countries and has made examples of companies like Apple, which it accused of benefiting from a sweetheart tax deal in Ireland worth as much as €13 billion ($13.75 billion). Both Apple and Ireland dispute the charges.

As pressure has mounted, some companies have started shifting their practices. In 2015, Amazon.com Inc. began to collect customer revenue from subsidiaries in several EU countries where it does business—instead of collecting it all in Luxembourg. Facebook Inc. followed suit last year for clients in the U.K.

Snap, which doesn’t make a profit, isn’t likely to be posting a big overseas tax bill for now. Non-U.S. ad revenue totaled just $18.3 million, or 5% of its total, in 2015, according to eMarketer. But that figure is expected to rise to $440 million, or 25% of the total, in 2018, eMarketer says.