Coffee With Gidi
2020 Trends and 2021 Forecast
We perform 550 valuations a year and all the insights I will be sharing with you are based on accurate data from work we prepared for our clients. I am humble to say we experienced a 15% growth this year even during these times.
I will address the 2020 fundraisings - Q1, Q2, and the second half of 2020. The impact of COVID-19 was in March and especially in April, but Q1 was not really affected because it was a continuation of 2019. Although in Q2, we saw a significant halt. One of the attributes that define crisis times is that investors and decision-makers stop processes, with no reference to whether it is right or wrong at the time. After recognizing that the world is still turning around, we saw a dramatic return and even an increase in the number of investments and values but not in seed - pre-seed companies. These companies are at risky stages because they are only at the beginning. Therefore, their investments stopped and recover slowly, which is something that we will “pay” for in the future. Most companies that were in a fundraising process before the crisis completed it but sometimes with lowered conditions.
In secondary transactions, like fundraisings, on the one hand, there was a halt, or the transactions were smaller than planned in March-May. On the other hand, over the past few months, from August until today, we see a dramatic increase in the number and volume of secondary transactions.
We see an increase in the number of IPOs since it is possible to raise money at high value which is attractive to shareholders. Second, M&A deals, which usually require physical meetings, are going through a major change because it is almost impossible to meet the company's management, and this is something we have not encountered before. If it is not possible to sell the company, an IPO is an alternative. We were involved in a complex blockchain IPO that ended in the first half of the year after 3 years of hard work and was completed despite the crisis.
In my opinion, there are IPOs with high values since there is a lot of money right now. The USA Fed printed huge amounts of money and this affects price increases but not in everything like in inflation but there is a big price increase in some sectors and company values.
There is a dramatic increase in value for companies that work online, companies that improve online processes, and companies with intangible products. As a result of the improvement, we can see an increase in their valuations. We can see a dichotomous situation. On the one hand, some companies were not harmed during COVID and have even grown. On the other hand, many businesses have collapsed or are trying to survive, for example - restaurants, tourism, culture and entertainment, event halls, small businesses, and more.
The pandemic created a new reality and a new work pattern. I think it is certain that we will not return to the world we had before, and we will see a lot of people who will give up on working from offices but will have to create a bigger workplace at home and therefore will need better foundations. These things will affect the business world, and we will see an interesting change.
The US election impact is not really related to the election results but to the feeling of stability or uncertainty. When the results weren't certain, we saw a decline in the stock market. There is a direct impact on Israel because the United States is a major global player and affects the entire world, especially Israeli high-tech.
I expect to see a domino effect that affects market segments, but it looks like two different economies. On the one hand, there is a growth in unemployment worldwide, which leads to the closure of businesses and economic difficulties. On the other hand, we can see some sectors blossoming. I do not see it changing in the first half of 2021, and hopefully, in the second half, we will see recovery and growth.
I suppose that as we move closer to the vaccine and the possibility of a normal life, even in parallel with COVID, we will be able to return to regular activities. As a result, we will see positive effects on the economy and especially in high-tech companies. As uncertainty decreases, we will gain stability, confidence, and optimism.
Israeli Politics don’t really affect high-tech companies but do affect the local economy, and part of that is since we are budget less for over half a year. But people have a short memory and will return to previous behavior patterns and try to fill in the gaps they missed out on.
To conclude, on a personal note, 12 years after founding S Cube, I sold the company to IBI Capital in January 2020. I still run the company, and today we are capable of giving you all the services we have given in the past and much more. Wishing everyone a Happy New Year, hopefully with much more health.
Gidi Shalom Bendor
Founder & CEO, S Cube of IBI Capital Group