Israeli tech startups raise $1.6 billion, in first sign of recovery from war toll
IVC-LeumiTech data shows fundraising rose in first three months of 2024, after drought in first months of conflict
Sharon Wrobel is a tech reporter for The Times of Israel.
Israeli tech startups nabbed a total of $1.6 billion from investors in the first three months of the year, in a first sign that the fundraising drought caused by the outbreak of the Israel-Hamas war is beginning to show some recovery, according to a report compiled by research center IVC and LeumiTech, a Bank Leumi arm that specializes in tech companies.
Capital raised by Israeli tech companies rose 10 percent in the first quarter of 2024 from the previous quarter, when $1.45 billion was secured as the war led to a sharp plunge in investments.
However, fundraising in the first three months of the year was still down 10% from the volume of capital raised during the same period last year, preliminary data presented in the IVC-LeumiTech report showed.
“Despite domestic instability brought on by the ongoing fighting and complex macroeconomic conditions, we see that the trend of stabilization in the industry continues into 2024,” stated LeumiTech CEO Maya Eisen-Zafrir. “Israeli high-tech is standing firm and showing encouraging signs of recovery.”
The Israeli army mobilized hundreds of thousands of reserve soldiers as the war began, some of whom remain in uniform after almost six 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 venture capital 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).
The number of deals recorded in the January-March period increased by 35% from the previous quarter, to 105, after showing consecutive quarterly declines since the beginning of 2022, according to the report. Deal flow during the reported quarter was down about 9% compared with the first quarter of 2023, when 115 transactions were recorded.
“After three consecutive quarters in which there were decreases in the volume and number of fundraising deals by Israeli tech companies, the figures for the first quarter in 2024 are surprisingly positive,” said IVC CEO Ben Klein.
The ongoing fighting did not deter foreigners from investing in Israeli startups as their participation in investments increased in the first quarter with a total of 316, up from 281 recorded in the previous quarter, the report said. Local investors were involved in 259 investments, up from 202 in the fourth quarter of 2023.
Larger deals led fundraising in the first quarter with six transactions above $100 million adding up to $752 million, accounting for about 47% of the total. Cyber startups nabbed $620 million in funds, or 38% of the total capital raised.
The number of early-stage or seed funding climbed for the first time in the first quarter of the year, compared with a continuing downward trend since the beginning of 2022, which is an “indication of investors’ confidence in new companies and their ability to develop,” the report said.
“We are pleased to see the growth in the number of transactions among young companies, which represents a significant vote of confidence by investors in Israeli entrepreneurs,” said Eisen-Zafrir. “Looking ahead, assuming that geopolitical or macroeconomic extreme scenarios do not materialize, we hope that we will see continued recovery in the next quarter as well.”
