Whenever potential buyers have approached Tel Aviv-based Fiverr, the technology firm has said no; like a growing number of Israeli startups, it has enough backing from private investors to stay independent for longer.
Traditionally, many of Israel's numerous tech companies have sold out at an early stage to global giants like Cisco, IBM, and Microsoft. Only a few—such as cyber security leader Check Point Software—have reached a significant size.
But now startups are using a sharp rise in private investment to pursue growth, often aiming for eventual stock market flotations. With founders looking longer term rather than trying to make quick money, acquisitions of Israeli technology firms fell in 2016 to their lowest level in six years.
Fiverr, backed by large venture capital funds including California-based Accel and Bessemer, is among those hoping to follow the Check Point model. Its online marketplace allows freelancers to offer services ranging from logo design to cartoons, and translations to psychic readings. Asking prices range from $5 to $10,000.
A consumer-oriented company focused on the U.S. market, Fiverr raised $60 million in November 2015, bringing its total funding to date to $110 million.
"Fiverr should be a multi-billion-dollar business. This is why we aren't looking to be acquired," Chief Executive Micha Kaufman told Reuters. "Eventually a company like ours will go public."
Fiverr declined to disclose the company's current valuation or name the would-be buyers that have approached it in the past couple of years.
Israel's high-tech industry is well established, using skills of workers trained in the military and intelligence sectors. Tax breaks and government funding have encouraged start-ups, and also drawn in entrepreneurs from abroad.
But acquisitions of Israeli high-tech companies more than halved last year to $3.5 billion, according to PricewaterhouseCoopers.
Stock market listings in the sector are also dwindling as investors increasingly prefer bigger tech companies. After eight initial public offerings valued at $3.4 billion in 2015, only two IPOs totaling $44 million took place in 2016—one in London and the other in Tel Aviv.
Instead, private investment is rising. In the first nine months of 2016, Israeli start-ups raised $4 billion, up 27% from a year earlier, according to the Israel Venture Capital Research Centre (IVC), which has forecast a record year in 2016.
Investment in more established late-stage companies surged 47% to $1.6 billion in the first nine months, IVC said.
The Aleph VC fund said four of its 12 companies have declined offers from would-be buyers in the hundreds of millions of dollars.
"I'm seeing for the first time that many founders are saying no to M&A. It's a good thing," Aleph partner Eden Shochat said. "These bigger companies create pockets of knowledge ... which is required to build an industry."
Aleph was structured to allow 12 years for investors to cash in, instead of the seven years typical for the venture capital sector, he said.
Accel, which has just opened an Israeli office, said it can invest $50 million in a growth stage company and has raised a fifth fund of $500 million to invest in Israel and Europe.
"The fact that money is available has clearly impacted the level of exits," Accel partner Philippe Botteri said.
Adam Fisher, a partner who manages Bessemer's Israel office, expects this trend of holding out to continue as long as growth funding, especially from new sources such as China, is abundant.
Fisher believes the availability of growth capital also has disadvantages. The risk is that generously-funded companies may be less efficient than those running on a shoestring.
Moreover, rejecting an offer to hold out for more money limits the number of potential buyers, while an IPO may also not be possible if stock market investors consider a firm has yet to grow big enough for a flotation.
Gone are the days of the tech boom in the late 1990s when relatively small firms listed on the U.S. Nasdaq market.
"Startups often need growth financing to reach the current IPO threshold of $100 million revenue run rate, but by no means does that imply that growth financing will create an IPO candidate," Fisher said.
Despite the country's reputation as a center for innovation, many global buyers prefer the more established markets of the United States and Europe. Rubi Suliman, high-tech leader for PwC Israel, said there are still not enough buyers who are familiar and comfortable enough with Israeli high-tech to drive a wave of deals.
"When potential buyers are relatively scarce, deal prices are expected to go down," he said.
Taking the IPO route could also prove difficult for Israeli firms in certain business areas. Some of the largest private companies in revenue terms are in the online advertising sector, which public markets have turned against.
The valuation of Israeli adtech firm Matomy, for example, has nearly halved since it went public in London in 2014.
With Facebook and Google owning much of the distribution and profit from selling ads directly to the advertiser, the pie for adtech firms is much smaller, said Nir Blumberger, Accel's Israel-based partner and a former corporate development executive at Facebook.
Amounts made by investors exiting adtech firms through sales or IPOs fell to $238 million in 2016 from about $600 million in 2015, according to IVC and the Meitar law firm.
In cybersecurity technology, the need for firms' services is growing but a proliferation of startups means competition is stiff. Cyber startups raised more funds last year than in 2015, but exits nearly halved to $660 million, IVC data shows.
"I still foresee this will be a big area for M&A and IPOs in the future but it will take a while to be built into a revenue stream," said Shochat.
A third group is automotive tech, boosted by the success of Mobileye, which makes driver warning systems aimed at preventing accidents. Investment in startups nearly doubled in 2016 to $680 million though exits brought in only $190 million.
Investors caution that companies in this sector require a lot of money over a very long period.