Early-stage startups facing extreme difficulty raising funds, says Israel Innovation Authority
Early-stage startups facing extreme difficulty raising funds, says Israel Innovation Authority
According to a survey conducted in the past month among 500 entrepreneurs, around half of early-stage Israeli startups have enough money for just six more months of operations
A recent survey by the Israel Innovation Authority, polling 500 entrepreneurs and startup managers in the last month, paints a grim picture for many companies, especially younger ones. The findings indicate that over 50% of early-stage high-tech companies have less than a 6-month cash reserve, and about 56% fear they won't secure another round of financing.
The Innovation Authority released an updated survey on the high-tech industry's status amid the onging war in Gaza. According to Dror Bin, CEO of the Innovation Authority: "From conversations and meetings we held in recent weeks, with all the players in the industry, investors, entrepreneurs and companies alike, we understand the difficulties of financing and the recruitment challenge for early stage companies. Along with the fast channel that we opened with a budget of NIS 400 million, we will come out during the war and after it with a package of operative solutions that will create investment incentives and increase the scope of investments in startups."
The survey highlights three primary challenges: obtaining financing, recruiting customers, and dealing with local uncertainty—with obtaining financing being the most formidable obstacle. A significant portion of the surveyed companies (28%) reported having only three months of cash remaining. Most are currently in the recruitment phase, but around 55% express pessimism about successfully completing a recruitment round, and a similar percentage believes they won't secure a mediation round either. A third of the companies anticipate the next recruitment round being a down round, recruiting at a lower value than the previous round.
Despite this pessimism, only 12% of companies foresee closing or selling at a loss in the next year, while approximately 64% believe their companies will experience growth.
According to forecasts, early-stage high-tech employment in Israel is expected to increase by around 9% in the coming year, with most growth occurring in small companies (fewer than 100 employees). Larger companies are anticipated to reduce their workforce in Israel by about 3%. The number of employees abroad in Israeli companies is also projected to rise by an average of about 13% in the coming year, with the growth rate increasing with the size of the company—those with over 100 employees expect a 28% increase in their overseas workforce.
