Amid war toll, Israeli startups nabbed $2.9b from investors, the most in two years
Larger deals mainly by cybersecurity firms led capital rounds over the past three months, while foreign investors’ share in funding Israeli startups rose, IVC-Leumitech data shows
Sharon Wrobel is a tech reporter for The Times of Israel.
Investment into Israeli startups and high-tech firms over the past three months showed the first quarterly year-on-year increase since the start of 2022, despite the country’s ongoing war with the Hamas terror group, according to a report compiled by research center IVC and LeumiTech, a Bank Leumi arm that specializes in tech companies.
Israeli tech startups attracted $2.9 billion in capital from investors in the April to June quarter, up 48 percent compared with the $1.96 billion raised during the same period in 2023, and the $1.63 billion that were nabbed during the first three months of the year, preliminary data of the report displayed. There were 110 deals in the second quarter as in the corresponding period last year.
Larger deals mainly by cybersecurity firms led capital-raising rounds over the past three months with six transactions above $100 million, accounting for about 62% of the total. American-Israeli cloud cybersecurity unicorn Wiz in May raised $965 million at a staggering valuation of $12 billion.
Excluding the Wiz deal, startup fundraising in the second quarter was still up 19% compared with the first three months of the year, adding to first signs that the capital drought caused by the outbreak of the Israel-Hamas is on a path of slow recovery.
“If current volumes of transactions continue, we are on pace for the tech sector to end the year on a growth trajectory compared to last year,” remarked LeumiTech CEO Maya Eisen-Zafrir. “From in-depth examinations we conducted regarding the identity of investors, it is encouraging to see foreign investors – who have never invested in Israel – taking part in transactions since the beginning of the war.”
In 2023, fundraising nosedived 56% to $6.9 billion year-over-year as investment into local high-tech firms continued to slump when war broke out in the aftermath of the October 7 onslaught on southern communities.
The Israeli army mobilized hundreds of thousands of reserve soldiers at the start of the fighting, some of whom remain in uniform after almost nine months. The absence of personnel in the tech sector, the growth engine of the Israeli economy, has damaged startups’ day-to-day operations, as well as their ability to attract foreign investors and raise funding.
The war hit the Israeli tech industry at the end of a crisis year in which it was already facing a global downturn in funding, as well as local political uncertainty over the government’s proposed judicial overhaul that threatened to erode investor confidence (and which has been shelved for now).
Commenting on the report, IVC CEO Ben Klein said that the preliminary data showed the volumes of investment in Israeli hi-tech continued to grow moderately, which is “not trivial given the circumstances.”
“The growing presence of foreign investors shows the attractiveness of Israeli hi-tech,” Klein added.
The data in the report indicated that the ongoing fighting did not deter foreigners from investing in Israeli startups as their participation in investments increased.
“The number of investments by foreign investors (a foreign-owned entity whose head office is not in Israel) increased slightly in the last six months, following a slump in the fourth quarter of 2023,” it was noted in the report.
Full data on fundraising activity for the second quarter is expected to be released by mid-July.
