Tel Aviv-based Fusion, an accelerator program that invests in early-stage Israeli startups and first-time founders announced on Thursday that it has raised a total of $20 million for its new fund.
Founded in 2017 by Guy Katsovich and Yair Vardi, Fusion has invested in over 100 early-stage startups with a combined valuation of $1 billion.
The new pre-seed fund is backed by US-based Insight Partners, a venture capital and private equity firm, along with 70 serial entrepreneurs and venture capitalists from Israel and the US, including hi-tech entrepreneur and angel investor Gigi Levy-Weiss and Talon Cyber Security co-founder Ofer Ben-Noon.
The fund has already invested in 30 startups built by Israeli entrepreneurs, including AI pharma startup Quris, localization startup Blend, Zoma, and The Real Cereal Co. Following the final closing of the fund, Fusion is targeting to make pre-seed investments into another 60 to 80 Israeli startups by 2026.
“At a time when investments in Israel have declined by 75% compared to last year, we believe it’s a great time to continue investing in Israeli companies and take risks where other angels and venture capital firms may hesitate or stall,” said Katsovich. “In the last five years, we have been one of the most active ‘under the radar’ investors.”
“We plan to continue at the same pace, as opposed to the trend we’ve seen in the last few years: Raising [too] large funds and deploying the capital [too] quickly,” he added.
In the first quarter of this year, Israeli tech companies raised $1.7 billion in capital, down 70% from the $5.8 billion in the first three months of 2022, according to a report by IVC Research Center and LeumiTech. The quarter marked the lowest figure in four years. That’s after private investments in the local tech sector peaked in 2021 with investments of a staggering $26 billion, slumping to around $15 billion in 2022.
“Today more than ever, first-time founders or those who work in verticals that Israeli investors aren’t familiar with, need to secure initial capital in order to achieve compelling milestones before they are ‘VC-ready,'” said Katsovich.
Fusion invests $150,000 in startups that are between the idea stage and the initial product or revenue stage. The accelerator program funds entrepreneurs that target the US market and facilitates direct access and introductions to future investors, mentors, advisors and potential clients.
“We want to replace the ‘friends and family’ round, and be the first to give startups a check with the incorporation,” said Katsovich. “Venture capital firms are not the first check in most startups – they lead the first institutional round.”
Over 20% of Fusion’s portfolio startups, which include real estate investment platform Agora, AI medical analysis platform DigitalOwl, and customer marketing platform Base.ai, are led by women founders. Over 70% of its portfolio companies have completed a successful investment round following the program, raising an average of $2.5 million.
Fusion holds a bootcamp in Tel Aviv twice a year with investors and entrepreneurs. After the two-month bootcamp, the participating founders fly to a three-week roadshow in Silicon Valley, New York and Los Angeles, where they meet US investors and mentors. Throughout the accelerator program, founders meet over 150 mentors from Israel and the US.
After completing the accelerator program, participants join Fusion’s alumni network of over 200 founders, which serves as a platform for ongoing workshops and forums covering fundraising, management of a company or board in later stages, hiring, sales and partnerships.