Israeli VC fundraising hits decade low, but investment volumes rise
A major concern in the Investors Report findings is the sharp drop in fresh capital available for new investments, with Israeli VC funds having just $922 million in dry powder in 2024. Despite weak fundraising, Israeli tech companies raised $10 billion in 2024, ranking third globally.
Israeli venture capital fundraising plummeted to its lowest level in a decade in 2024, according to the latest IVC-GNY-KPMG Investors Report. With only $1.15 billion raised by 21 funds, down from $2 billion across 32 funds in 2023, the report highlights the ongoing challenges facing Israel’s high-tech investment landscape. However, despite this stark decline in new capital, the data also reflects an unexpected resilience: investment in Israeli technology companies increased, reaching $10 billion, positioning Israel as the third-largest tech fundraising hub globally.
The report, which analyzes 1,868 VC-backed investments and tracks 863 venture capital funds, paints a complex picture of an ecosystem navigating a period of economic and geopolitical turbulence. While the total availability of venture capital—often referred to as “dry powder”—has fallen significantly, investor confidence in Israeli technology has not entirely wavered.
A decline in fresh capital, but strong follow-on support
A major concern in the findings is the sharp drop in fresh capital available for new investments. Israeli VC funds held a cumulative $11.8 billion in dry powder over the past nine years, yet in 2024, the available capital shrank to $922 million—with only $415 million allocated to first-time investments, the lowest in recent years. This trend raises concerns about the ability of early-stage startups to secure funding.
"The Investor Report reveals a complex dynamic in the Israeli venture capital market: fundraising has hit a decade low, yet actual investment volumes have increased compared to 2023, despite the ongoing war," said Yuval Horn, Chair of the technology and life sciences practice at GNY. "This data underscores the resilience of the Israeli tech ecosystem."
Horn also noted a notable increase in investor interest in defense technologies, a sector that has gained significant traction due to Israel’s security situation. Several new venture funds specializing in defense and dual-use technologies have been established, suggesting a potential shift in capital allocation in 2025.
A shifting investment landscape
Despite the downturn in fundraising, Israeli VC firms maintained a steady pace of new investments, particularly in cybersecurity and generative AI, the two leading sectors in 2024. The number of new investments in fintech and foodtech, however, fell to its lowest levels since 2018, reflecting broader global trends of reduced enthusiasm in these industries. Meanwhile, deeptech companies continued to attract significant capital, with nine firms securing funding rounds exceeding $100 million each.
"Though investments in cybersecurity and generative AI were stable, mega-rounds in a few standout companies have skewed total investment volumes upwards," said Dina Pasca Raz, Partner and Head of Technology at KPMG Israel. "Excluding these large rounds, overall investment levels reflect the challenges that Israel’s tech sector faced in 2024. That said, we are beginning to see early signs of recovery, which we expect to continue into 2025."
Investment in life sciences companies also saw an uptick compared to 2023, highlighting an area of continued interest among venture firms.
Israeli institutions and foreign corporate VCs pull back
One of the most significant declines occurred in Israeli institutional investment, which fell to $83 million across 29 deals, down from $187 million in 44 deals the previous year. Similarly, foreign corporate venture capital funds (CVCs) significantly reduced first-time investments, completing only 73 deals—the lowest in a decade.
Yet, some optimism remains. Dror Bin, CEO of the Israel Innovation Authority, emphasized that Israel’s ability to weather past crises suggests a potential rebound. "Our key challenge is ensuring that Israeli high-tech continues to grow and attract investment, particularly in the early stages where funding is more difficult to secure," Bin stated. He outlined efforts to expand funding sources for startups, including direct investments and incentives for institutional investors.
A cautious but optimistic outlook for 2025
While Israeli venture capital fundraising in 2024 reached a historic low, the broader investment landscape is far from bleak. With $10 billion raised by Israeli tech firms, continued enthusiasm in AI, cybersecurity, and deeptech, and early signs of a shift in investor sentiment, the report suggests that the ecosystem may be primed for a gradual recovery in 2025.
Ben Klein, CEO of IVC, pointed to the number of funds currently in the process of fundraising as an indication that sentiment could improve in the coming year. "VC fundraising kept dropping in 2024 following a weak year in 2023, reaching the lowest point since 2015. However, we expect a shift in 2025 as many funds are actively working to secure new capital."
