US-based investment firm secures $106 million for fund to back Israeli startups

Denver-based venture capital firm Ibex Investors has secured $106 million in capital for a fund to be dedicated to investing solely in Israeli early-stage startups, even with the country in its fifth month of war against the Hamas terror group.

With the new fund, Ibex, which has been active in Israel for the past decade, is planning to back as many as 15 local early-stage startups across tech industry areas, including software, infrastructure, cybersecurity, development tools, and insuretech.

The US-based VC firm received commitments for the fund, mainly from US investors despite two crises in Israel over the past year, the government’s contentious judicial overhaul and the outbreak of the war, that have compounded a funding squeeze in the tech sector that is the nation’s growth engine.

“Since the outbreak of the war, we have seen foreign funds pausing investments in Israel, which has created a vacuum in the market,” Nicole Priel, partner at Ibex, told The Times of Israel. “It is a bold bet for investors to wire over an investment when many founders of startups a few weeks later could be called up for reserve duty, standing on the battlefield.”

“But we know founders who have closed deals even while they are fighting in Gaza so we have seen that it can work,” Priel added.

Fundraising by Israeli tech startups and companies plunged 56 percent last year compared with the same period in 2022, as the sector grappled with political uncertainty around a judicial overhaul proposed by the right-wing government of Prime Minister Benjamin Netanyahu, followed by the outbreak of the war with Hamas in the aftermath of the October 7 atrocities, both of which have deterred investors.

Nicole Priel, who leads the Israel office of Denver-based venture capital firm Ibex Investors. (Courtesy)

Ibex raised the fund in the period from around May to June last year, when political protests over the judicial overhaul marked a time of great uncertainty for investors, and then after the October 7 onslaught, when Palestinian terrorists stormed into Israel from Gaza and killed some 1,200 people and kidnapped hundreds of others.

Among the hundreds of thousands of reservists called up by the Israeli army to join the war are many senior executives and employees working in the high-tech industry. The absence of key personnel in the tech sector has affected startups’ day-to-day operations, as well as their ability to attract foreign investors and raise funding.

Asked about why Israel is a good place for investment during these challenging times, Priel, who leads Ibex’s Israel office and manages over $200 million in foreign money for investment into local startups, said that the “Israeli tech entrepreneur possesses an innate sense of drive, creativity, and perseverance required to turn ideas into reality,” and that the current environment “is an opportune time to be building ventures.”

“In the past we have seen Israel emerge stronger from crises and we are optimistic and recognize the potential of startups that are growing to be more resilient and innovative as they are going through difficult times,” said Priel.

Founded in 2003 and headquartered in Denver with offices in New York and Tel Aviv, Ibex has $1 billion in assets under management and focuses on both public and privately held companies operating in industry areas including cybersecurity, enterprise software, infrastructure, and artificial intelligence.

Since setting up its first Israel fund in 2012, Ibex has made investments in 40 Israeli early-stage startups and growth-stage firms including BeamUp, Appwrite, Honeycomb, Visionary.ai, Dome9 (acquired by Check Point Software Technologies Ltd.), Glassbox, Innovid, Gauzy and Cynet. The VC firm, which opened its Tel Aviv office in 2020, said it hired two new employees over the past month, bringing the total number of workers to seven people.

“Despite the ongoing war and challenging global macroeconomics, our LPs [limited partners] recognize the opportunity to make outsized returns precisely from opportunities such as these,” said Ibex founder and chief investment officer Justin Borus. “Most of the world’s greatest innovations come as a direct result of war and conflict and we believe this time will be no different.”