Firm Profile > Pearl Cohen Zedek Latzer Baratz > Tel Aviv, Israel
Pearl Cohen Zedek Latzer Baratz Offices
Azrieli Sarona Tower, 121 Menachem Begin Road
Tel Aviv, 6701203
Pearl Cohen Zedek Latzer Baratz > The Legal 500 Rankings
Pearl Cohen Zedek Latzer Baratz has one of the largest IP teams in Israel and, with an on-the-ground presence in New York and London, is also one of the few firms in the market with office locations abroad, thus offering a seamless platform for the enforcement of IP rights in key global jurisdictions. Headed by senior partner Yossi Markovich, the IP litigation team is a key player in patent revocation proceedings in Israel. Dor Cohen-Zedek heads the trade marks, designs and enforcement group, and is instructed by a litany of domestic and international brands. Also recommended is Haim Ravia, who specialises in cyber, privacy and internet law, and also leads the copyright and open source software practice.
‘Flexible and provide pragmatic easy-to-understand advice that can be quickly used in execution.’
‘Combination of international expertise, knowledge, excellence, dedication and flexibility.‘
‘Highly skilled in this niche area on a global level.‘
‘Ability to change their mind in real-time based on litigation dynamics.‘
KG Dexcel Pharma Technologies
Arise CSL BEHRING
Healthcare and life sciences Tier 2
Pearl Cohen Zedek Latzer Baratz’s practice is significantly weighted towards IP matters, in line with its signature strength. The firm manages the patent portfolios of a string of leading industry players, including Bayer Healthcare and Sanofi. In addition, it is well versed in advising life sciences and healthcare clients on finance, securities and M&A transactions. Group co-head Mark Cohen splits his time between Israel and the US, and focuses on patent prosecution and licensing. Corporate and licensing specialist Yael Baratz jointly heads the department.
Mark Cohen; Yael Baratz
Opko Health Ltd.
KAHR Medical Ltd.
Endymed Medical Ltd.
XL Therapeutics Ltd.
Hera Med Ltd.
Vidac Pharma Ltd.
Omnix Medical Ltd.
University of Pennsylvania
LDS, Lyotropic Delivery Systems
Biondvax Pharmaceuticals Ltd.
Panaxia Pharmaceutical Industries Ltd
Maccabi Health Services
Hi-tech and start-ups Tier 2
Pearl Cohen Zedek Latzer Baratz has an established reputation in Israel's IP legal market, and is also a strong performer in the country's healthcare and life sciences, fintech and venture capital space; however, what makes the firm especially unique in the market is its international office network. Indeed, with offices in the US and Europe, clients 'benefit from the availability of the firm's expertise, experience and prices in these territories in addition to Israel'. Key figures in the practice group include Atir Jaffe, who specialises in private equity investing, M&A and IP-related issues in the media, telecoms, and medical devices sectors; Guy Lachmann, who leads the firm's Japan practice as well as the Germany practice; Yael Baratz, who chairs the corporate and licensing group; and Hili Rashkovan, who has a range of experience in IP transactions, fundraising and M&A.
Atir Jaffe; Yael Baratz; Guy Lachmann; Hili Rashkovan
‘This firm has offices in the US and Europe and we benefit from availability of their expertise, experience and prices in these territories in addition to Israel.‘
‘The team is very responsive and ready to adapt themselves to their customers needs and schedule. They are always available to discuss issues and topic about the inventions and applications.‘
‘We thoroughly recommend Guy Lachmann and his team at Pearl Cohen. The team’s particular strength was that they were excellent at achieving a quick turnaround on all of our legal matters to help keep the company dynamic and moving towards success.‘
‘The main advantage of the lawyers and other patent attorneys we work with, is their availability and that they are hassle free in all aspects. They welcome all and any work we provide, meet schedules with every task, and provide results and not excuses.’
‘Without a doubt, the combination of the team’s rare legal abilities and their extensive experience with the various areas relevant to our activities, enables them to serve our intense needs, that include tight schedules and complex thinking outside the box.‘
‘We feel fortunate to have met such top-quality attorneys who always have a focused solution for every legal issue, in a swift and effective manner.‘
Cyarx Technologies (Siemplify)
Diehl Defence GmbH & Co.
A well-known name in the Israeli IP market, Pearl Cohen Zedek Latzer Baratz provides comprehensive IP legal support to clients in the areas of biotech, healthcare, pharmaceuticals, software, and autonomous driving. Headed by highly rated senior partner Yael Baratz, the firm's corporate and licensing group is one of Israel's largest dedicated transactional IP teams. The practice group has noted expertise in cross-border commercial agreements, which it handles as part of its wider strategic IP service including portfolio development and patent prosecution. Mark Cohen heads the life sciences practice, and Hili Rashkovan handles commercial transactions for clients in a variety of sectors including software, IT, medical devices and clean-tech.
Yael Baratz; Mark Cohen
High Performance Optics
Quality by Vision
Capital markets Tier 3
Pearl Cohen Zedek Latzer Baratz is a popular choice for clients in the medical cannabis field, where it advises numerous companies on investment rounds, private placements, mergers, acquisitions and public offerings on the Tase. The group is also active in advising clients in the real estate sector on private placements, shareholding sales and public rights offerings. Practice head Ilan Gerzi has particular expertise in dual listings of public companies, and in acting for medical cannabis companies on IPOs on the Tase. The capital markets practice added eight lawyers in 2018/19, including senior associates Aliza Gabizon and Mark Hamilton.
Panaxia Pharmaceutical Industries Israel Ltd. and Herodiom Investments Ltd.
Tefen Industrial Engineering and Management and Systems Analysis Ltd.
Oren Investments Ltd.
Tefen Industrial Engineering and Management and Systems Analysis Ltd.
Cannomed Medical Cannabis Industries Ltd.
Avrot Industries Ltd.
A.L.D Advanced Logistics Development Limited
Employment Tier 3
Pearl Cohen Zedek Latzer Baratz’s firm-wide emphasis on the hi-tech and life sciences sectors translates into a strong representation of Israeli and multinational technology companies in labour and employment matters, including CA Technologies Israel, Ormat Technologies and Aspect Imaging. The group advises on a wide range of traditional employment matters, such as employment agreements, terminations and collective negotiations. It also has experience in non-compete covenants, confidentiality matters and option plans. Group head Kalia Klein handles both non-contentious matters and litigation.
Yankowitz y Building & Development Ltd
CA Technologies Israel Ltd.
Bait Balev Ltd.
Hilti (Israel) Ltd.
Ormat Technologies Inc.
Aspect Imaging Ltd.
Brand Industries Ltd.
Edmond De Rothschild Bank
Lev Group Media
Hilton Tel Aviv
Utilis Israel Ltd.
Pearl Cohen Zedek Latzer Baratz's angel investing and venture capital fund formation practice provides a full range of structuring, taxation, and transactional advice to fund managers and investors. The fund practice is an integral component of the firm's hi-tech offering, and thus, in addition to its start-up investment practice, the team has experience in forming venture capital funds focused on a variety of tech sub-sectors, including agri-tech, food-tech, mobility, and healthcare, among other sectors. Atir Jaffe is the name to note for VC fund formation, and Yael Baratz and Mark Cohen are key figures in the corporate and hi-tech practice. Yael Shimon-Many is also recommended.
Atir Jaffe; Yael Baratz; Mark Cohen
‘They have a very good a d experienced team that can deliver. They will give you a door-to-door service, from the get go to the final execution of the deal. Always efficient and exceptionally professional.‘
‘Yael Shimon-Many is the lawyer you want to have with you on tough deals. She knows every detail of the deal and she is both very nice and very tough.‘
CERTUS Port Automation
Beyond Mobility Ventures
COPIA Agro & Food Technologies Fund
Anna Ventures fund
Tax Tier 3
Pearl Cohen Zedek Latzer Baratz's tax department is frequently instructed by companies requiring tax structuring advice concerning corporate transactions, such as M&A, involving the sale of IP and subsequent exposure to capital gains tax. The firm also has expertise handling VAT disputes and acting for international clients in a variety of corporate restructuring processes, including buy-outs and divestments, which entail significant tax implications. Team lead Henriette Fuchs has experience in international tax structuring in terms of inbound and outbound transactions, and indirect tax.
Other key lawyers:
‘Excellent consultants on international taxation and VAT issues.’
ISS Global A/S
Salesforce.com EMEA Ltd/Inc
Impresa Pizzarotti & Co SpA
ForAfric – Mill group
Big Shopping Centers Ltd
GigaWatt Global Coop
BioTime / Cellcure
Plasticon Europe BV
Bonobot Technologies Ltd
Gevasol Holdings BV
XCD Exceed Ltd
CEE Hotels group
Big Shopping Centers
Virtu Financial Services
Wolverine Asset Management
Lely International NV
Ocean Data Ltd
TIIN Capital B.V. – Dutch Sec. Fund
NFT Inc & NFT Ltd
Pearl Cohen Zedek Latzer Baratz is distinguished by its cross-border focus, which is supported by multiple foreign desks as well as its four international offices in Boston, London, Los Angeles and New York. The firm draws upon its leading IP client base to specialise in advising IP-rich companies on corporate and M&A matters, particularly those in the technology, life sciences and telecoms sectors. Yael Baratz chairs a department that also includes hi-tech specialist Atir Jaffe, Yossi Weinstock and Hili Rashkovan, who has a strong background in IP transactions.
Hill-Rom Holdings, Inc.
Keshet Broadcasting Ltd.
Quality by Vision Ltd.
aMoon Fund, 83North Fund, EMC Corporation
Cyarx Technologies Ltd.
Real estate and construction Tier 4
Pearl Cohen Zedek Latzer Baratz frequently handles real estate sales, acquisitions and assists with submissions concerning affordable housing bids. In addition, the team advises clients on all aspects of evacuation-reconstruction projects, and medium to large-scale commercial projects. Benjamin Baratz has considerable expertise in litigation proceedings, in addition to extensive knowledge of asset sales, and mixed-use real estate projects. Sagit Shahmoon advises construction companies, developers and entrepreneurs on construction agreements, secured lending, land registration and combination deals.
Other key lawyers:
A.I America Israel Investment Ltd.
Etz HaShaked Ltd.
BST Construction Ltd.
Reich – Shahar Ltd.
Luzon A. Assets & Investments Ltd.
BLD Group Real-Estate Ltd.
Wynn Rothschild Ltd.
Ramot Office Ltd.
Pearl Cohen Zedek Latzer Baratz's IP team has an exceptional reputation in the areas of medical devices, biotech and pharmaceuticals, and also handles patent prosecution and portfolio management for clients in the aerospace and defence sector. Founder and managing partner Zeev Pearl has wide-ranging experience of worldwide IP strategy, including proceedings before the USPTO. In addition to the firm's patent work, Dor Cohen Zedek leads the firm's trade mark, designs and enforcement practice and is instructed by a huge variety of multinationals, Israeli IP-based companies, and tech-transfer offices, which she advises on trade mark prosecution, filing, and strategy. Another contact in the team is senior partner Mark Cohen, who heads the life sciences department.
‘A real pleasure to work with this team.‘
‘Mark Cohen is always responsive to emails and requests for calls, no matter what time zone I am in.‘
‘The team is responsive and available around the clock. They are smart as well; great to work with.‘
Yeda R&D Co.
Pearl Cohen Zedek Latzer Baratz > Firm Profile
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.
|IP Litigation||Nathaniel Agou|
|Employment and Benefits, US Business Immigration||Francine Alfandary|
|Corporate and Licensing||Adar Altman|
|Commercial Litigation, Real Estate||Benjamin Baratz|
|Corporate and M&A, Licensing||Yael Baratz|
|Patents, Designs and Intellectual Property Litigation||Yosi Barkai|
|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|
|US Business Immigration||Ari Farkas|
|Patents & Designs||Idan Frydman|
|Corporate Finance and Securities||Ilan Gerzi|
|Infrastructure and Project Finance||Ittai Gross|
|Tax||Dr. Oz Halabi|
|Internet, Cyber & Copyright||Dotan Hammer|
|Corporate, M&A, Capital Markets and Securities, and Commercial Litigation||Yohai Hurvitz|
|Hi-Tech, Venture Capital and Private Equity||Atir Jaffe|
|Internet, Cyber & Copyright||Tal Kaplan|
|Employment and Labor Group||Kalia Klein|
|Life Sciences||Richard Korn|
|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|
|Patent Litigation and Post Grant Proceedings||Daniel J Melman|
|Corporate and Commercial||Guy Milhalter|
|Russia and CIS, Ibero-America||Anna Moshe|
|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|
|Patent, Patent Litigation, and U.S. Patent Office Litigation||Nathan D Renov|
|Commercial Litigation||Tal Rotman|
|Corporate and Employment||Sagit Sazgar|
|Real Estate||Sagit Shahmoon|
|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|
|Ariel Amir||View Profile|
|Iyar Aviram||View Profile|
|Israel Bachar||View Profile|
|Yosi Barkai||View Profile|
|Gad Ben-Gera||View Profile|
|Omri Ben-Natan||View Profile|
|Sarah Benowich||View Profile|
|Barak Bing||View Profile|
|Dr. Hava Caner Ercegovic||View Profile|
|Matan Carmel||View Profile|
|Revital Cohen||View Profile|
|Dor Cohen Zedek||View Profile|
|Nachman Cohen Zedek||View Profile|
|Jan Decker||View Profile|
|Uriel Elia||View Profile|
|Hava Ercegovic, Ph.D.||View Profile|
|Idan Frydman||View Profile|
|Henriette Fuchs||View Profile|
|Aliza Gabizon Gilboa||View Profile|
|Gal Gafny||View Profile|
|Adi Golding||View Profile|
|Karina Goldman||View Profile|
|Dr. Peretz Greenman||View Profile|
|Alexey Gurov Ph.D.||View Profile|
|Dr Oz Halabi||View Profile|
|Mark Hamilton||View Profile|
|Ephraim Heiliczer||View Profile|
|Tzvi Hirshaut||View Profile|
|Mee Hoe-Castleberry||View Profile|
|Ofra Kaplan||View Profile|
|Omer Kelner||View Profile|
|Elina Khesin||View Profile|
|Eli Khesin||View Profile|
|Peter Kirschenbaum||View Profile|
|Doron Latzer||View Profile|
|Hon-Man Lee||View Profile|
|Rebecca Lenetsky||View Profile|
|Jordan Lofaro||View Profile|
|Justin Lurie||View Profile|
|James Mangan||View Profile|
|Yossi Markovich||View Profile|
|Anat Marum||View Profile|
|Brendan Mee||View Profile|
|Daniel J. Melman||View Profile|
|Nahum Mittelman||View Profile|
|Yuval Mor||View Profile|
|Eran Morag||View Profile|
|Amit Nachbar Chung||View Profile|
|Ricki Newman||View Profile|
|Lior Ostashinsky||View Profile|
|Nadav Pearl||View Profile|
|Zeev Pearl||View Profile|
|Gabriella Peretz||View Profile|
|Haim Ravia||View Profile|
|Noa Regev||View Profile|
|Nathan D. Renov||View Profile|
|Tal Ron||View Profile|
|Aryeh Rosenzweig||View Profile|
|Rotem Rosenzweig-Sima||View Profile|
|Daniel Rubé||View Profile|
|David Rubin||View Profile|
|Nofar Sahar||View Profile|
|Ronit Sella-Steinman||View Profile|
|Hilla Shaanani||View Profile|
|Yaniv Shemesh||View Profile|
|Adi Shoval||View Profile|
|Moshe Sister||View Profile|
|Neil Smollet||View Profile|
|Ilana Soloducho Kashmir||View Profile|
|Nathaniel Sugarman||View Profile|
|Shaoul Sussman||View Profile|
|Sean Toby||View Profile|
|Micha Tollman||View Profile|
|Tamar Van Der Boom, Ph.D.||View Profile|
|Hadar Volberg Groshar||View Profile|
|Gadi Weiss||View Profile|
|Tzahi I. Yagur||View Profile|
|Michael Yamin||View Profile|
|Shani Zeeli||View Profile|
|Nir Zohar||View Profile|
|Amit Zomer||View Profile|
|May Zur||View Profile|
Staff FiguresNumber of lawyers : 200
LanguagesAfrikaans Arabic Chinese Dutch English French German Hebrew Hindi Japanese Mandarin Romanian Russian Spanish
MembershipsABA AIPLA AIPPI FICPI IBA INTA LES MARQUES PTMG TAG Law
OtherOther offices : Boston Other offices : Haifa Other offices : London Other offices : Los Angeles Other offices : New York Other offices : Tel Aviv
Doing Business In
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.
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.
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.
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.
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.
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:
- 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.
- 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.
- 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.
- 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.
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.
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.