Sponsored briefing: Popular tech sectors of today’s transactions

It is evident that the year 2021 was a remarkable one for the Israeli tech industry. Multiple companies turned into unicorns and many already coined unicorns either went public or merged with Special Purpose Acquisition Companies (SPACs) on various stock exchanges worldwide. Still today, nearing the final quarter of 2022, Israeli-based companies continue to be a point of attraction and focus for domestic and foreign investors and strategic and financial acquirers alike, even amidst what some would consider a borderline-recession and during declines in the stock markets globally. Through this whirlwind, some of the desirable sectors we have seen continue to grow and entice interest from investors are data centre services, cyber security, artificial intelligence (AI) based technologies, online shopping and delivery services, agriculture technology and the food-tech industry.

Covid-19 led to a significant surge in demand for data centre services capable of hosting and channelling the enormous volume of cloud-based data and services being created. With social distancing mandates in force, countless employees, students, and consumers were required, or chose, to work, study and shop from the comfort and safety of their homes. The natural effect of this was the further shift of physical interactions to the online realm, resulting in companies and governmental agencies and organisations grappling to maintain operations despite use overload, or adapt to a practically virtual-only world. Data centres came into play as a solution for internet traffic, providing organisations with backup components and infrastructure for power supply, data communication connections, environmental controls, and various security matters. A recent significant transaction in this sector was the sale of 49% of Med-One Ltd’s share capital from the Livnat family (represented by our firm) to the prominent American private equity firm Berkshire Partners and the van Rooyen Group, for a consideration reflecting a company valuation of approximately NIS1.5bn, and we expect to see continued growth in all that is related to data centres and solutions.

Throughout the various worldly events and different trends, cyber security has remained a steadfast sector, always proving to be of relevance. The sectors and industries who all witnessed a growing demand for adaptation to virtual services, also faced the need to further protect their critical systems and sensitive information from fraud, theft and damage. The cyber solutions developed in the Israeli market are advanced and extensive and the companies doing business in this field have achieved a distinguished reputation worldwide, making them desirable investment prospects. As one example, in the summer of 2021, Rapid7, a NASDAQ company which is a leading provider of security analytics and automation services, acquired Israeli-based IntSights Cyber Intelligence Ltd, which specialises in contextualised external threat intelligence and proactive threat remediation, for $335m (paid in a combination of cash and equity), just months following its $30m Series D investment round.

The increasing move from in-person interactions to the online realm also triggered a greater curiosity in AI, and the ways it can be applied to enhance the quality of many services. With the growing use of AI, there has a been a surge in demand for synthetic data – ie, information which is artificially manufactured, rather than generated by real-world events or models. Synthetic data is created algorithmically, for the purpose of being used as test datasets of production or operational data, to validate mathematical models, and to train machine learning models. The benefits of using synthetic data include reducing constraints when using sensitive data such as adhering to privacy protection regulations, tailoring the data needs to certain conditions and avoiding bias among race, gender and age. As the metaverse is starting to take shape, and the scope of use of virtual reality and augmented reality to create a 3D virtual world is greater than ever, synthetic data will most certainly play a pivotal role in its development, by enabling interaction with virtual objects, optimisation of rendering and introducing photorealistic user avatar representations. A good example of a company which achieved outstanding results using AI to form synthetic data is our client Datagen Technologies Ltd, which recently closed a successful $50m Series B financing round, led by incoming investor Scale Ventures, and backed by existing investors Viola Ventures and TLV Partners. Datagen Technologies is a leader in synthetic images and video for computer vision use cases and has launched a self-serve SaaS platform which enables its customers to generate photorealistic labelled datasets based on specific criteria and distributions for the purposes of training machine learning models more efficiently.

The recent events in the world have also inevitably led to a drastic increase in the use of online food delivery services and to the flourish of the e-commerce culture, with restaurants and malls which were forced to close their doors to dine-in guests and shoppers for extended periods of time. This resulted in skyrocketing valuations to companies operating delivery platforms for food and merchandise, and which have managed to control increasing consumer demands by offering contactless delivery and electronic payments solutions. We acted as Israeli counsel for DoorDash, a NYSE-traded company which operates an online food ordering and food delivery platform having the largest market share in the United States, which made headlines in the field of e-commerce when it announced its plan to acquire 100% of the shares of Helsinki-based technology company Wolt Enterprises Oy, including its dominant Israeli-based subsidiary, in a share-swap transaction, reflecting a valuation of $8.1bn of Wolt.

Lastly, the sectors of agriculture technology, or agtech as it is commonly referred to, and the food-tech industry, have both seen increased attention as recent events, including Covid-19 which caused a surge in demand for supplies and services, and the turmoil in Eastern Europe, have led to a nearly-unprecedented shortage in energy resources and basic food products. Startups in these fields are working towards turning the agriculture and food industries into more modern and efficient sectors in all their stages, by improving yield and profitability, with the interest of feeding the world in ways that are more sustainable, and with less harm to the environment and animals. This also ties in with the last years’ trend regarding ESG (environmental, social, and corporate governance), sending investors to apply multiple non-financial factors in the course of their analysis process to identify material risks and growth opportunities. A food-tech company which has seen great attention recently is Future Meat Technologies Ltd, which uses animal cells and technology to produce lab grown meat products and which secured an impressive $347m Series B investment from, among others, S2G Ventures (represented by our firm).