Firm Profile > Pearl Cohen Zedek Latzer Baratz > Tel Aviv , Israel

Pearl Cohen Zedek Latzer Baratz
Azrieli Sarona Tower, 121 Menachem Begin Road
53rd floor
Tel Aviv, 6701203
Israel

Healthcare and life sciences Tier 2

From IP, to licensing and distribution, finance and acquisitions, and clinical trials, Pearl Cohen Zedek Latzer Baratz services the full spectrum of commercial needs for domestic and international clients in the healthcare and life sciences sector. The department is headed by Yael Baratz and Mark Cohen, the latter of whom splits his time between the firm's New York and Tel Aviv offices. Of note, Cohen is advising OPKO Biologics on agreements relating to its phase-III clinical trials across 80 sites globally. Additionally, Cohen assisted Ayala Pharmaceuticals with the establishment of a worldwide license agreement with Bristol-Myers Squibb. The team headed by Marcella Eytan, also advises Chiasma Inc on clinical trial-related agreements and documents for its phase III clinical trials in 17 countries worldwide. Moreover, the firm, which is perhaps best known for its IP capabilities, has helped build patent portfolios for pharmaceutical companies including Sanofi and Sol-Gel Technologies.

Hi-tech and start-ups Tier 2

Pearl Cohen Zedek Latzer Baratz's tech sector strengths include both company- and investor-side work, which sees the firm involved in major cross-border commercial agreements, investment deals, fund formation, and M&A. Atir Jaffe is the firm's key contact for funds and investment work; he recently advised 2B Angels on a Series D investment in Yotpo in a financing round totalling $51m. On the company side, Guy Lachmann acted for Rookout in a Series A financing round led by TLV Partners VC, and has also handled various financing transactions for cyber companies Convexum and Unbotify. Also of note, Hili Rashkovan assisted Phinergy with a $128m joint venture with Yunnan Aluminum, and also advised the client on an additional $73m licensing deal with a separate Chinese company. Other major investor clients include AP Capital Partners Fund, Amoon Ventures, while company side clients include fintech company Nayax and Algaennovation, which develops technology for sustainable indoor microalgae cultivation.

Intellectual property: commercial/transactions Tier 2

Pearl Cohen Zedek Latzer Baratz is an established name in Israel's IP market, and with strong practices in hi-tech and healthcare, the firm is regularly involved in domestic and multinational licensing transactions, clinical trials, and R&D agreements. In a stand-out matter, Zeev Pearl and Hili Rashkovan advised Phinergy on a $73m out-licensing agreement with China's Yunnan Aluminium. Mark Cohen, who splits his time between the firm's Tel Aviv and New York offices, is acting for Ayala Pharmaceuticals in relation to the establishment of an exclusive worldwide licensing arrangement with Bristol-Myers Squibb. In the domestic market, Yael Baratz and Marcella Eytan advised an R&D company on a collaborative research, option and licensing agreement with a medtech company involving technology for the detection of the cell origin of tissue-specific DNA. Baratz is also engaged by the tech-transfer arm of Hadassah Medical Organisation. Also recommended is Haim Ravia, who specialises in cyber, data protection and internet law, and has advised ACUM on multiple licensing deals with international music services.

Intellectual property: disputes Tier 2

Pearl Cohen Zedek Latzer Baratz has considerable strengths in patent litigation in the life sciences and hi-tech sectors, and has also been involved in complex trade mark and IP ownership disputes. In the patent space, managing partner Zeev Pearl represented a multinational healthcare company in patent proceedings before the registrar concerning the applicability of Israeli law to biologics as opposed to chemical drugs. Pearl has also handled opposition proceedings for client such as Dimerix Bioscience PTY and CSL Behring. Additionally, Yossi Markovich is representing a prominent Israeli R&D company in a patent ownership dispute with the Kimron Veterinary Institute involving questions of statute of limitation. Trade mark disputes include Markovich and Dor Cohen Zedek acting for a sports retailer in a long-running opposition against Brooks Sports; following a successful outcome for the client, Brooks Sports has appealed to the District Court.

Capital markets Tier 3

With on-the-ground teams in Tel Aviv and New York, Pearl Cohen Zedek Latzer Baratz is well positioned to assist dual-listed corporates with securities issues in Israel and the US. Known for its IP and hi-tech roots, the firm has particular expertise acting for growth companies in the life sciences and healthcare sectors. Department head Ilan Gerzi acted for BiondVax Pharmaceuticals in relation to a shelf prospectus offering on Nasdaq; Gerzi also assisted the client with the delisting of the company's shares from the TASE, making Nasdaq its primary securities market. Other key clients include Medipower (Overseas), Together Start Up Network and Kadimastem.

Employment Tier 3

Pearl Cohen Zedek Latzer Baratz advises its corporate clients on a range of ongoing labour and employment matters, from HR policy advice to terminations, and also handles employment litigation. The employment group is led by Kalia Klein, who recently acted for manufacturer in relation to a collective agreement signed with the Histadrut, and also represented an infrastructure company in negotiations with the Histadrut regarding the integration of certain employees into the company. Klein has also handled employment litigation.

Investment and venture capital funds Tier 3

Pearl Cohen Zedek Latzer Baratz's strong hi-tech practice has led to strong relationships with active venture capital firms; however, its expertise extends far beyond portfolio investment and the team advises various investors on the formation of venture capital, private equity and other types of funds. A key figure is hi-tech and venture capital specialist Atir Jaffe, who advised Keshet International Broadcasting on the formation of a $55m venture capital fund, and also assisted with the formation of the new Israeli impact fund, COPIA Agro & Food Technologies Fund. In the private equity space, the team handled the formation of the AP Partners Fund, which reached over $82m in its initial closing. Another important feature is the firm's global network, which includes US tax lawyer Oz Halabi, and uniquely positions the funds department to handle cross-border mandates.

Commercial, corporate and M&A Tier 4

Pearl Cohen Zedek Latzer Baratz has 'a comprehensive approach to doing business across multiple industries, and the team understands each one down to the very finest details'. Led jointly by Doron Latzer and Yael Baratz, the corporate group has complementary strengths in cross-border investment and M&A and high-value commercial and joint venture agreements. In a cross-border mandate, Yossi Weinstock advised Telit Communications on the $105m sale of its auto division to TUS International. Another key figure in the team is Ilan Gerzi, who advised Together Start Up Network on a high-value merger transaction in the medical cannabis sector. In the commercial space, Hili Rashkovan acted for Phinergy in relation to a strategic joint venture with a Chinese state-owned metal conglomerate.

Tax Tier 4

The team at Pearl Cohen Zedek Latzer Baratz has 'a unique understanding of the intersection of domestic and international tax matters' and the firm has the global presence to field real experts in US, European and Israeli tax law. Henriette Fuchs chairs the Israel tax team and provides comprehensive tax advice to clients such as BIG Shopping Centers. Fuchs is also co-representing a client in tax litigation questioning the relevant legislation for the taxation of the client's activities beyond Israel's territorial waters. Based in the firm's New York office, Oz Halabi chair's the US tax team and regularly works alongside the Tel Aviv hi-tech practice in relation to the taxation of venture capital funds and cross-border investors.

Intellectual property: filing/prosecution

Pearl Cohen Zedek Latzer Baratz is 'experienced in every facet of the IP market' and provides 'intimate partner involvement in each and every filing procedure'. One of the firm's major attractions is its global network. With offices and key partners in Israel, the US and the UK, the team is able to manage the contentious and non-contentious aspects of major international IP portfolios. Managing partner Zeev Pearl handles worldwide patent applications for Sanofi and also handles Israeli patent applications for another prominent international pharmaceuticals company. Life sciences practice head Mark Cohen, who splits his time between New York and Tel Aviv, has been involved in worldwide patent applications for OPKO Health and Sol-Gel Technologies. The trade marks group is headed by Dor Cohen-Zedek, who advises a number of high-end fashion brands on trade mark strategy and prosecution. Moreover, the team handles design, trade mark and patent portfolios for clients such as Elbit Systems, Sodastream Industries, Aspect Imaging, and Yeda Research and Development Company.

The firm: Pearl Cohen Zedek Latzer Baratz (“Pearl Cohen”) is an international law and patent firm with offices in Israel (Tel-Aviv, Haifa), the United States (New York, Los Angeles, Boston), and the United Kingdom (London).  Due to the firm’s unique global presence, it has an extraordinary reputation dealing with cross-border issues in the areas of commercial law (Hi-tech transactions, capital markets, M&A, taxation), litigation, and intellectual property, a field in which the firm is considered to be the leading and most distinguished in Israel.

The firm represents businesses, technology-oriented companies, and investors from both local and international markets, including Fortune 500 and small-cap emerging companies, startups and entrepreneurs, companies traded on Israeli and worldwide stock markets, academic research institutions, and government-related entities. Our international team strive to remain at the cutting edge of our specialist areas of expertise by providing our clients with innovative resolutions to legal problems. Our knowledge and experience across a broad range of legal issues uniquely positions us to offer tailor-made legal and professional solutions to clients that combine numerous practice areas and industries across multiple jurisdictions.

The Pearl Cohen Advantage: Full Service Global Firm: Our professionals constitute one global team. We collaborate seamlessly to bring the highest level of service and experience to our clients, who benefit from our professionals’ diverse backgrounds and intimate knowledge of cutting-edge technologies. We are dedicated to helping our clients thrive in today’s business environment.

Department Name Email Telephone
IP Litigation Nathaniel Agou
Employment and Benefits, US Business Immigration Francine Alfandary
Patents Yoav Alkalay
Corporate and Licensing Adar Altman
Employment and Labor Group Meital Ament-Shtramer
Commercial Litigation, Real Estate Benjamin Baratz
Corporate and M&A, Licensing Yael Baratz
Patents, Designs and Intellectual Property Litigation Yosi Barkai
Corporate Lior Baruch
Capital Markets Maria Berkovits
Corporate and Commercial Litigation Galit Bonet
Trademarks and Designs Todd Braverman
Russia and CIS, Ibero-America Meny Broid
Corporate and Licensing Yitzchak Chamudot
Intellectual Property and Patents Mark S. Cohen
Trademarks and Designs Dor Cohen Zedek
IP Nachman Cohen Zedek
Corporate and Licensing Marcella Eytan
US Business Immigration Ari Farkas
Patents Brenda Flockhart-Shanks
Infrastructure and Project Finance Gali Friedhof
Patents & Designs Idan Frydman
Tax Henriette Fuchs
Corporate Finance and Securities Ilan Gerzi
Infrastructure and Project Finance Ittai Gross
Tax Dr Oz Halabi
Internet, Cyber & Copyright Dotan Hammer
Capital Markets Tammy Hevrony
Corporate, M&A, Capital Markets and Securities, and Commercial Litigation Yohai Hurvitz
Hi-Tech, Venture Capital and Private Equity Atir Jaffe
Hi-Tech Oded Kadosh
Internet, Cyber & Copyright Tal Kaplan
Employment and benefits Kalia Klein
Life Sciences Richard Korn
Hi-Tech Guy Lachmann
Corporate, M&A, and Corporate Finance & Securities Maya Lakstein
Corporate and M&A, Venture Capital and Private Equity Doron Latzer
Patent Litigation David Loewenstein
Trademarks, Litigation and Designs Anat Mandel
IP Litigation Yossi Markovich
Patents Brendan Mee
Patent Litigation and Post Grant Proceedings Daniel J Melman
Corporate and Commercial Guy Milhalter
Russia and CIS, Ibero-America Anna Moshe
Copyrights Veronica Munoz
Patent Netta Nashilevich
Corporate and Licensing Michael B Nussbaum
Life Sciences Jonathan Passner
Intellectual Property and Patents Zeev Pearl
Corporate and Licensing Inbal Perlstein-Mandelbaum
Patents, Designs, Patent Litigation and Post Grant Proceedings Caleb Pollack
Life Sciences Craig Puckett
Licensing Hili Rashkovan
Copyrights Haim Ravia
Patent, Patent Litigation, and U.S. Patent Office Litigation Nathan D Renov
Commercial Litigation Dr Tal Rotman
Commercial Amir Sadeh
Corporate and Employment Sagit Sazgar
Real Estate Sagit Shahmoon
Hi-Tech Yael Shimon-Many
Corporate Keren Shmueli
Patent Litigation and Post Grant Proceedings Clyde Shuman
Patents, Trademarks, Copyrights and Designs Groups Doron Sieradzki
Hi-Tech, Corporate, Securities and Commercial Hadar Solomon
Corporate and Licensing Joel Stein
Corporate Litigation Karin Vishinsky
Corporate Finance & Securities Benjamin Waltuch
Patent and Intellectual Property Assaf Weiler
Corporate and Licensing Yossi Weinstock
Intellectual Property Morey B Wildes
Antitrust and Competition Tzahi I Yagur
IP Litigation Guy Yonay
Capital Markets and Securities Nir Zohar
Photo Name Position Profile
 Nathaniel Agou  photo Nathaniel Agou
 Francine Alfandary  photo Francine Alfandary
 Yoav Alkaly  photo Yoav Alkaly
 Paula Altman  photo Paula Altman
 Adar Altman  photo Adar Altman
 Meital Ament-Shtramer  photo Meital Ament-Shtramer
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 Lee Ardon  photo Lee Ardon
 Avigail Arfi  photo Avigail Arfi
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 Dr. Moshe Brody  photo Dr. Moshe Brody
 Meny Broid  photo Meny Broid
 Dr. Hava Caner Ercegovic  photo Dr. Hava Caner Ercegovic
 Yitzchak Chamudot  photo Yitzchak Chamudot
 Adi Citron  photo Adi Citron
 Mark S. Cohen  photo Mark S. Cohen
 Dr. Revital Cohen  photo Dr. Revital Cohen
 Inbar Cohen  photo Inbar Cohen
 Nachman  Cohen Zedek   photo Nachman  Cohen Zedek 
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 Christopher Demaras  photo Christopher Demaras
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 Marcella Eytan  photo Marcella Eytan
 Maor Ezra  photo Maor Ezra
 Ari Farkas  photo Ari Farkas
 Brenda Flockhart-Shanks  photo Brenda Flockhart-Shanks
 Gali Friedhof  photo Gali Friedhof
 Inbar Friedman  photo Inbar Friedman
 Henriette Fuchs  photo Henriette Fuchs
 Nurit Gefen  photo Nurit Gefen
 Ilan Gerzi  photo Ilan Gerzi
 Noa Giora  photo Noa Giora
 Oleksandra Glozman  photo Oleksandra Glozman
 Dr. Peretz Greenman  photo Dr. Peretz Greenman
 Dana Grinberg  photo Dana Grinberg
 Ittai Gross  photo Ittai Gross
 Guy  Haik   photo Guy  Haik 
Dr Oz Halabi  photo Dr Oz Halabi
 Dotan Hammer  photo Dotan Hammer
 Oryan Hass Schwartz  photo Oryan Hass Schwartz
 Daniel Heim  photo Daniel Heim
 Brian  Heitzer   photo Brian  Heitzer 
 Tammy Hevrony  photo Tammy Hevrony
 Mee Hoe-Castleberry  photo Mee Hoe-Castleberry
 Yohai Hurvitz  photo Yohai Hurvitz
 Atir Jaffe  photo Atir Jaffe
 Oded Kadosh  photo Oded Kadosh
 Nadav Kaftzan  photo Nadav Kaftzan
 Ori Kaplan  photo Ori Kaplan
 Dr. Millie Kaplan Zeevi  photo Dr. Millie Kaplan Zeevi
 Divyya Kapur  photo Divyya Kapur
 Ofer Karin  photo Ofer Karin
 Elina Khesin  photo Elina Khesin
 Elie Kirshenbaum  photo Elie Kirshenbaum
 Richard Korn  photo Richard Korn
 Dr. Pavel Kozlovsky  photo Dr. Pavel Kozlovsky
 Miriam Kurien Tyrell  photo Miriam Kurien Tyrell
 Leslie Kushner  photo Leslie Kushner
 Guy Lachmann  photo Guy Lachmann
 Maya Lakstein  photo Maya Lakstein
 Jaclyn Landers  photo Jaclyn Landers
 Abishag Levy  photo Abishag Levy
 Dela Leybovich  photo Dela Leybovich
 Dr. Hao Li   photo Dr. Hao Li 
 Devorah Livneh  photo Devorah Livneh
 Sofia Livshitz  photo Sofia Livshitz
 David Loewenstein  photo David Loewenstein
 Dr. Mallory Lutz  photo Dr. Mallory Lutz
 Anat Mandel  photo Anat Mandel
 Brendan Mee  photo Brendan Mee
 Daniel J. Melman  photo Daniel J. Melman
 Shani Menasherov  photo Shani Menasherov
 Guy Mihalter  photo Guy Mihalter
 Michal Moav  photo Michal Moav
 Yuval Mor  photo Yuval Mor
 Anna Moshe  photo Anna Moshe
 Dr. Ginat Muginstein  photo Dr. Ginat Muginstein
 Veronica M. Munoz  photo Veronica M. Munoz
 Moshe Nachman  photo Moshe Nachman
 Abed Nashef  photo Abed Nashef
 Netta Nashilevich  photo Netta Nashilevich
 Inbal Navot-Eisenthal  photo Inbal Navot-Eisenthal
 Ricki Newman  photo Ricki Newman
 Dr. Eran Noah  photo Dr. Eran Noah
 Michael B. Nussbaum  photo Michael B. Nussbaum
 Darie Ofek  photo Darie Ofek
 Michel Ohayon  photo Michel Ohayon
 Jonathan M. Passner  photo Jonathan M. Passner
 Michal Pearl  photo Michal Pearl
 Inbal Perlstein-Mandelbaum  photo Inbal Perlstein-Mandelbaum
 Sivan Permut  photo Sivan Permut
 Dr. Kathryn Piffat  photo Dr. Kathryn Piffat
 Caleb Pollak  photo Caleb Pollak
 Craig Puckett  photo Craig Puckett
 Hili Rashkovan  photo Hili Rashkovan
 Nathan D. Renov  photo Nathan D. Renov
 Michal Rom  photo Michal Rom
 Noam Rosen  photo Noam Rosen
 Dana Rosen-Asadon  photo Dana Rosen-Asadon
 Aryeh Rosenzweig  photo Aryeh Rosenzweig
 Ron Rotman  photo Ron Rotman
 Tal Rotman  photo Tal Rotman
 Dr. Amir Rubinstein  photo Dr. Amir Rubinstein
 Amir Sadeh  photo Amir Sadeh
 Sagit Sazgar  photo Sagit Sazgar
 David  Schachter   photo David  Schachter 
 Dr. Cheryl (Yaffa) Schindler  photo Dr. Cheryl (Yaffa) Schindler
 Itai Sela Saldinger  photo Itai Sela Saldinger
 Ronit Sella-Steinman  photo Ronit Sella-Steinman
 Yael Shaffer  photo Yael Shaffer
 Sagit Shahmoon  photo Sagit Shahmoon
 Daniel Shaw  photo Daniel Shaw
 Yaniv Shemesh  photo Yaniv Shemesh
 Eran Shif  photo Eran Shif
 Dr. Dror Shiftan  photo Dr. Dror Shiftan
 Adi Shillo  photo Adi Shillo
 Yael Shimon-Many  photo Yael Shimon-Many
 Keren Shmueli  photo Keren Shmueli
 Clyde Shuman  photo Clyde Shuman
 Doron Sieradzki  photo Doron Sieradzki
 Moshe Sister  photo Moshe Sister
 Patrick Skacel  photo Patrick Skacel
 Hadar Solomon  photo Hadar Solomon
 Joel Stein  photo Joel Stein
 Dr. Rivi Steinhart  photo Dr. Rivi Steinhart
 Dr. Prakash Subbiah  photo Dr. Prakash Subbiah
 Deepa Sugathan  photo Deepa Sugathan
 Sarah Suozzo  photo Sarah Suozzo
 Dr. Ophir Tal  photo Dr. Ophir Tal
 Asaf Tenenbaum  photo Asaf Tenenbaum
 Rodik Ulman  photo Rodik Ulman
 Dr. Tamar Van der Boom  photo Dr. Tamar Van der Boom
 Idan Velger  photo Idan Velger
 Kelly Virdee-Crofts  photo Kelly Virdee-Crofts
 Karin Vishinsky  photo Karin Vishinsky
 Benjamin Waltuch  photo Benjamin Waltuch
 Assaf Weiler  photo Assaf Weiler
 Yossi Weinstock  photo Yossi Weinstock
 Amir Weiser  photo Amir Weiser
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 Tzahi I. Yagur  photo Tzahi I. Yagur
 Haim Zvi Yeger  photo Haim Zvi Yeger
 Guy Yonay  photo Guy Yonay
 Zachi Zach  photo Zachi Zach
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Number of lawyers : 160
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Other offices : Boston
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Israel

Pursuing and advancing its reputation as the “Start-Up Nation”, in 2017, the State of Israel continued to emphasize innovation at the forefront of its culture and business environment. The international Bloomberg Innovation Index of 2017 ranked Israel as the 10th largest country of innovation. More than ever, Israel offers countless investment opportunities for global and domestic strategic partners, private equity and venture capital firms. Individuals can also invest in Israel as angel investors, as limited partners in venture capital funds focusing on Israeli investment, through crowd funding and public offerings around the globe.

This prosperity of  Israel’s Start-Up Nation is reflected by the record sums invested in local innovation-driven companies and the increased sum-per-transaction across multiple industry segments, from cyber security and AI to biotechnology and medical devices.

In tandem, garnering such success demands of local companies and law-firms to carefully consider the manner in which they protect their key assets, primarily their talent and intellectual property. This article explores recent trends in the Israeli High-Tech industry and details its existing complexities and challenges.

Overview

Israel’s extensive and prosperous innovation industry has long been attributed to the country’s cultural focus on innovation and out-of-the-box thinking. Bill Gates has been quoted saying that there is a greater concentration of talented hi-tech manpower in Israel in comparison to other countries, almost to the extent of Silicon Valley. The industry began domestically as a strong base for research and development in information technologies and later spread globally. Large multinational companies have established R&D hubs in Israel including, in the ICT sector alone, Apple, Cisco, Google, IBM, Intel, Motorola and Microsoft. For example, a large part of the Windows NT operating system developed by Microsoft and the Pentium MMX Chip technology were designed for Microsoft and Intel, respectively, at their R&D facilities in Israel. More recently, European, Chinese, Korean and now Japanese companies have increased their interest in Israeli technologies as well.

Israeli scientists developed the cell phone, flash drives, voicemail, voice over IP, real-time Internet messaging, a pill-sized swallow-able camera, Waze, Wix, expandable Stent and drip-irrigation, among a long list of other innovations that have impacted the people around the world. Key Israeli industries include (1) life sciences, pharmaceuticals, medical devices and improved medical processes (e-health), (2) cyber security, (3) tech, telecom and media and (4) defense.

According to the IVC research center, in 2017, Israeli high-tech companies raised $5.24 billion across 620 transactions, reflecting an increase of 9% from 2016 during which $4.83 billion were raised across 673 transactions. Moreover, in 2017 the total transaction value for exits of Israeli companies reached $23 billion and included two mega-exits, which each exceeded $1 billion. Discounting the two mega-exists, the total transaction value in 2017 was $6.6 billion, reflecting an increase of 19% from 2016.

Since the 1980s, more than 250 Israeli related companies have been listed for trading in the U.S. and currently 84 Israeli companies are listed on the NASDAQ, 5 are listed on the NYSE, and 6 are listed on the AMEX. Israel has the greatest number of listed companies in the U.S. after China. Over the last 5 years, more than 500 Israeli companies have been acquired. The expanding list of Israeli companies that have been acquired or gone public, have the effect of increasing the appetite of VC and other investors scouting for the right Israeli companies to invest in.

These numbers become more impressive as you realize that Israel’s population is only 8.5 million people and its land mass is approximately the size of the State of New Jersey, one of the smaller US states.

Over recent years, the tendency of listing Israeli companies in the U.S. and other foreign markets has continued to grow, whereas the number of publicly listed Israeli companies on the Tel Aviv Stock Exchange has decreased. This trend is not only attributed to the attractiveness of the foreign markets for Israeli companies and start-ups, but also due to the small and limited local Israeli market.

In an attempt to reverse this trend, the Israeli Securities Authority, has promoted over the past two years extensive and somewhat dramatic legislation and regulations, all aimed to ease the strict regulation that applies to Israeli listed companies, and to attract Israeli companies back to the local capital market.  Among the recent legislative amendments are the exemption for small cap companies from filing quarterly reports and requiring only semi-annual reports instead, the approval of filing reports in English instead of Hebrew for certain companies contemplating listing in foreign capital markets in the future and waiving certain disclosures, thus allowing the companies to prepare shorter and more concise public reports.

The low interest rates prevailing in the Israeli capital market during the recent years has attracted many companies, both Israeli and foreign, to issue traded debentures on the Tel Aviv Stock Exchange. During recent years, many foreign real estate companies, such as Brookland Upreal Limited, Moinian Limited, KBS SOR (BVI) holdings Ltd. and others, usually with real estate in the U.S. and Canada, have issued debentures in Israel and have raised vast amounts of capital on the Israeli market. Given the current low interest rate, the most common trade product over these past few years has been bonds, whereas equity raises are less common and in a smaller volume.

Early stage funds and other investors from outside of Israel are increasingly trying to find the right Israeli companies to invest in. Because of the smaller size of early stage investments, these investors had not historically targeted the Israeli market.   In addition, we are witnessing a change of mind-set in the typical terms of early-stage engagement and investment in these technology-based companies. These trends are typical of mature companies and are reminiscent of behaviors currently impacting Silicon Valley tech companies. In essence, new approaches are aimed at increasing the legal protection for founders. Competition increases with VC funds for the opportunity to invest in more successful companies and promising entrepreneurs and as such the pendulum has begun to swing back towards the founders in the weight of rights offered to investors. These patterns also appear in earlier stages of the companies’ lifecycle and are slowly developing to become customary in the local ecosystem. These are contractual features aimed at creating a friendlier environment for companies and entrepreneurs, reflecting the adoption of a more moderate, pro-founder perspective by investors.

Investments

According to the IVC, Israeli high-tech companies raised $4.83 billion during 2016 and $5.24 billion during 2017, which are new records since the investment statistics started being kept. These sums represent an increase of approximately 270% from the total investments in 2012, approximately 220% from the 2013 figures, approximately 150% from the sums invested in 2014 and 120% of the 2015 investment amounts. These are certainly incredible figures, which show the attractiveness of the Israeli High-tech sector. Presumably, some of these investments will bear fruit over the next few years leading to a further increase in M&A transactions and IPOs of Israeli companies .

Investment from 2016 and 2017 show more investments from the Far East, specifically, by Chinese investment funds and strategic investors. The first Chinese company investment into an Israeli technological company took place in 2010. Today, Chinese investors and Chinese companies that invest in Israel are commonplace, while recent Chinese foreign-investment regulations have been enacted to encourage strategic and technology-related investments over pure financial equity holdings.

In addition, Israeli infrastructure projects and investments continue to increase, as Israel has discovered gas reserves off its shores and modernizes its aging highways, public transportation, ports and other national infrastructures. The increased participation of multinational conglomerates in Israeli infrastructure tenders, has a healthy side-effect of contributing to the globalized interest of investing in Israeli industries and technologies. In the field of energy, several projects are underway, employing renewable energy technologies including solar, thermos-solar, pumped storage and the like.

Company Acceleration

Along with the above, we have witnessed the enormous expansion of the economic environment in which Israeli technology companies operate. In recent years, dozens of accelerators, incubators, shared work spaces and similar ventures have emerged in the local ecosystem which are sponsored by Israeli hospitals, universities, municipal authorities, tech giants such as Samsung, Microsoft, IBM, Intel and others. They are aimed at meeting the market’s growing needs by giving more attention to entrepreneurs and their startup ventures.

The local incubators, accelerators and hubs offer early-stage startups critical mentorship, tools and resources that help entrepreneurs flourish. Examples in Israel range from Japanese market-oriented incubators such as The Samurai House; to BizTEC, an accelerator that assists the Technion’s (Israel leading engineering university) students and graduates in bringing their ideas to by using the university’s resources to speed up pre-seed and seed companies’ trajectory and success.

Deal Structure Trends

Valuing stock at early stages has proven to be problematic as it does not always reflect and accurately predict the company’s future scalability while delaying the process of procuring investment. Thus, the current trend in Israel is that investors and companies alike are turning to use agreements that enable them to postpone such early valuation, such as a convertible loan agreement or Simple Agreement for Future Equity (AKA “SAFE”), based on which lenders may elect, in the future, to convert the loan amount they provided into equity at a considerable discount. The end goal of this investment strategy is that companies may procure financing at an early stage without committing to a specific premature or miscalculated valuation.
The Israeli high-tech financing ecosystem has completely adopted the Silicon Valley terminology in describing the development stage that a company has reached by reference to the series of preferred stock that has most recently been issued. Silicon Valley standards have migrated as far as Israel and have been commonly used as part of local fundraising transactions. These involve, for instance, the almost complete shift to non-participating preferred stock as part of structuring startup company liquidation preferences and the adoption of more founder-friendly approaches by VC investors, aimed on strengthening founder motivation and incentives. Similarly, we have also witnessed abundant early-stage pre-seed funding activity during 2017. More companies raise money in the pre-seed funding stage which in turn yields greater valuations for Series A funding and considerably larger deal volumes.

Unconventional methods of funding are becoming more common in the local Israeli startup scene, and Israel is by far today in the forefront of the global blockchain and crypto-currency activity. The tokenization and ICO trend is gaining more and more momentum, albeit growing concerns by regulators and a somewhat fragile legal basis for operation. Local securities laws make it very challenging for Israeli companies to tokenize their technology and sell such tokens to the general public. Nevertheless, many local companies chose other friendlier jurisdictions for these operations, all based on novel Israeli technology and local research and development.

M&A trends

In the last few years, Israel has seen many more acquisitions of Israeli companies or control of Israeli Companies by Asian companies, in a market which was traditionally dominant by US investors. In addition, the number of acquisitions of Israeli companies by other Israeli companies has continued to rise. 2017 reflected an all-time high of M&A activity with some phenomenal acquisitions of Israeli companies by foreign giants (most notably the acquisition of Mobileye by Intel for an approximate amount of US$ 15 billion). Finally, Israeli companies are increasingly seen expanding – specifically in sales – by the acquisition of foreign companies. Proposals are under discussion allowing for simplification of tax deferred mergers, split-offs and acquisitions.

Tax and other incentives for investment in Israel

The Law for the Encouragement of Capital Investment provides for various tax incentives to attract capital to Israel and to encourage economic initiative and investments of foreign and local capital. In many cases, capital gains generated from the sale of securities by a non-Israeli shareholder may be exempt from Israeli tax and the tax rate on dividends will often be governed by a tax treaty for lower rates. In addition, Israeli companies may be entitled to government grants and tax rates that can be as low as 10%. Finally, there are binational grant programs such as the Israel-U.S. Binational Industrial Research and Development fund where Israeli and American companies cooperate on R&D, manufacturing, marketing and sale.

Non-Israel Venture Capital Funds

Israel provides (through an individual tax ruling) VC funds with tax incentives to encourage investment by non-Israeli partners in Israeli or Israeli-related ventures. For the most part, and subject to several requirements (e.g., number of investors in the fund and the amount the fund, foreign partners in a VC fund will be tax-exempt on capital gains derived by the Fund and other income will be taxed at a preferential rate provided by an applicable tax treaty (to the extent applicable). Additionally, even when a fund operates in Israel through an office located in Israel (which may result in the constitution of a permanent establishment), Israel provides the non-Israeli partners with tax and filing exemptions.

Angels’ Law

Acknowledging the impact of the high-tech industry on the Israeli economy and the challenges start-up companies face in raising seed investments, Israel adopted a unique tax incentive law applicable to seed investors (the Angels’ Law). Pursuant to the Angels’ law, investors that purchase stock of an Israeli company, which is a research and development company, are entitled to deduct the amount of their investment in such company as an ordinary deduction (which can provide a 48% tax saving). Under the Angels’ Law there are several requirements to be eligible for the tax incentive, most of which relates to the operation of the company in the field of research and development.

A Few Tips

Israeli Corporate law is similar, from a legal point of view, in many ways to US law but there are a several facts to be aware of when contemplating your first Israeli transaction:

  1. Israeli private companies are required to file certain information with the Israeli Companies registrar which information is available online for a nominal fee. This information includes the articles of association, identity of directors, identity of shareholders (including their respective holdings) and any liens on the assets of the company. While not all companies’ have fulfilled their obligation to update the Companies Registrar, this registry might be the first place to start.
  2. Often technology-based companies have received governmental R&D funding. The governmental funding was supplied in order to encourage both R&D and manufacturing in Israel which can entail certain payments or penalties to the government if the government-funded intellectual property transferred outside of Israel.
  3. Public Israeli companies often have one shareholder or a group of shareholders that hold more than 50% of the voting shares of the Company. This can result in an easier method of acquiring control. Traditionally, Israelis are known to be tough negotiators but make good partners after the deal is finalized.
  4. The Israeli work-week is Sunday through Thursday and most businesses are closed on Friday and Saturday.

Intellectual Property Considerations

The rapid growth of the innovation driven industry is interconnected with the need for protection of intellectual property. Therefore, securing intellectual property has become an integral part of securing and ensuring success and the Israeli legal system has a well-structured outline and the robust laws to do so.

Intellectual property rights in Israel are protected through both statutory and common law systems, many of which are based on early British Mandatory law. Today, Israeli case law has become a source of nuance and modernization in terms of intellectual property, as legislation has been amended throughout the years to meet new developments. That said, international law practices, e.g. in the US and Europe, still have an impact on Israeli legislation and case outcomes.

Recent Trends – IP Ownership

Under the Patents Law, an invention made by an employee as a result of his employment and during the period of employment belongs to the employer, unless the parties have agreed otherwise.

Recently, joint ventures between universities, hospitals, the Israel Defense Forces, big tech companies’ employees and start-up companies have become popular. Nevertheless, typically it is the institution, rather than its employees, who owns the Intellectual Property, except where there is an explicit agreement that determines otherwise. Thus, the clash between the desire of significant institutions’ employees  to collaborate with start-ups companies and their lack of ability to own and assign the IP developed by them can create disputes and uncertainty.

Accordingly, many disputes at present involve the question of ownership, whether the invention is a “service invention” (thus property of the employer) or whether the invention is the property of the inventor. It is a question to be decided in view of the circumstances and often depends upon the contractual arrangement. Case-law highlights the importance of determining ownership of an invention at an early stage and documenting ownership in writing.

Indeed, the difficulty of disputes over intellectual property with such powerful and large institutions has resulted in researchers leaving academia and finding work in the high-tech sector or forming their own ventures instead. Universities have even responded with the creation of entities that deal exclusively with technology created at the university to commercialize this technology and bring a stream of revenue to such university.
Israeli IP-related legislation is progressing in accordance with trends in innovation, both in theory and in practice, yet the complexity of ownership issues remains. Accordingly, local cooperation with academia, governmental bodies and such other significant institutions should be treated with caution due to IP ownership considerations. Nevertheless, the State of Israel encourages entrepreneurs to engage with domestic companies and local firms to commercialize IP on a global scale.

Conclusion

Overall, the Israeli market is one that is constantly changing and reacting to the global environment, most specifically to technology and venture-funding epicenters such as Silicon Valley. The existent early-stage activity highlights a switch of approach from the “family and friends” funding to more sophisticated tier-one players, small VC funds and modern fundraising platforms such as crowd funding. This increases the supply of available funds for entrepreneurs and improves the potential performance of local start-ups. These trends also show the willingness of entrepreneurs to prolong the venture’s early stage as much as possible, in order to reach the crucial fundraising stage at a higher valuation with business and technological readiness and maturity.

Undoubtedly, the Israeli market offers a tremendous number of investment opportunities.  Successful investing  requires investors to structure and identify the suitable deal and early-stage involvement. The networking ecosystem in Israel is well developed with conferences, meetups and networking parties.  It is recommended to visit Israel to experience the buzz and take part in the Startup Nation.

Final Remarks

With mass amounts of innovation and record-breaking success in Israel’s various tech sectors, there are business considerations and legal matters that must be addressed. Being a responsible investor requires a deep understanding of when and how to get involved and under what terms and conditions. Often times this means using the right deal structure, such as investing through convertible securities in order to expedite early-stage growth in a more accurate way or embedding modern liquidation preference models for larger financing rounds.

In order to achieve strong returns in the Israeli high-tech industry, one must intertwine the business and the legal considerations, engage with the right individuals and companies while making sure that the Company invested in has rigorously protected their crown-jewels, their technology and the related intellectual property rights.