2025 VC SurveyIsraeli startups may face valuation challenges as investments surge in 2025
2025 VC Survey
Israeli startups may face valuation challenges as investments surge in 2025
Israeli firms often raise Seed rounds in Israel at valuations that are higher than they would be in the US. As a result, when these startups go to raise Series A in the US they might find the valuations offered by investors to be lower than expected, says Flint Capital.
“The resilience of founders is critical, and in 2023 and 2024, the world saw that even with fewer resources, startups continued to deliver under challenging circumstances, whether it was reserve duty, rockets, or other issues,” explained Sergey Gribov, Partner at Flint Capital. “This resilience attracted more investments, especially from top-tier international funds.”
Gribov joined CTech for its 2025 VC Survey to share what he calls “an interesting problem” when it comes to an oversupply of money in Israel, ultimately driving valuations up. “In sectors like cybersecurity, the valuations of Israeli startups are now way higher than those of U.S. startups. This creates challenges for later rounds,” he explained.
You can catch the entire interview below.
Fund ID
Name of fund/funds: Flint Capital
Total sum of the fund: $400M+
Partners: Dmitry Smirnov, Sergey Gribov, Andrew Gershfeld
Notable/select portfolio companies (active): Flo, Socure, Cyolo, ODAIA, Sensi.AI, Cynomi, Bluebricks
Notable exits: VOCA.ai, WalkMe, CyberX
2024 is over. How can you summarize it in terms of the Israeli high-tech industry?
It's clear that 2024 was a year of war, and it obviously impacted Israeli high-tech a lot. Many people were on reserve duty, which caused significant psychological stress. At the same time, the amount of investment in Israeli high-tech grew significantly. Israeli startups showed that they can deliver no matter what, and I believe that’s a big reason why funds and overall investors want to invest even more in Israeli startups.
The resilience of founders is critical, and in 2023 and 2024, the world saw that even with fewer resources, startups continued to deliver under challenging circumstances, whether it was reserve duty, rockets, or other issues. This resilience attracted more investments, especially from top-tier international funds.
At the same time, this created what I find to be an interesting problem—there’s now an oversupply of money in Israel, which drives valuations up. For example, in sectors like cybersecurity, the valuations of Israeli startups are now way higher than those of U.S. startups. This creates challenges for later rounds.
Looking ahead to 2025 - What challenges and opportunities await the Israeli high-tech sector in the coming year, and how are you, as investors, preparing for them?
I believe 2025 looks very good for Israeli high-tech. As I mentioned, there’s a lot of money available, and many funds are interested in investing in Israeli startups.
However, there’s this dilemma: Israeli startups often raise seed rounds in Israel at valuations that are higher than they would be in the U.S.
When these startups go to raise Series A in the U.S., they might find the valuations offered by U.S. investors to be lower than expected. In some cases, they come back to Israel to raise an A round or a bridge round to improve their performance and aim for a better valuation. This dynamic is leading to more flat A rounds.
On the brighter side, the exit landscape for 2025 looks much more optimistic. There’s a big pipeline of pre-IPO companies waiting for the right window. If conditions are favorable, we’ll likely see more IPOs, which, as we know, will further bolster the overall ecosystem.
When it comes to macroeconomic conditions, as investors, these are largely beyond our control. Having said this, we can influence how our portfolio companies navigate these changes and adapt to them. For instance, on our end, we make sure to focus on maintaining discipline around valuations and ensuring that startups are well-prepared to deal with global market dynamics.
Something to add here is that operating both in Israel and the U.S. gives us a unique vantage point. We help startups understand the realities of different markets and adjust their strategies accordingly. One approach we emphasize is creating back-loaded and flexible budgets. This allows companies to extend their runway, if necessary, and to focus on achieving meaningful traction before their next funding round.
The goal is to ensure startups are hitting the right milestones before scaling aggressively. By aligning their growth with market realities, they’re better positioned to succeed, regardless of the broader macroeconomic shifts.
How will new American leadership affect the global high-tech industry or economy? And where does this place Israel and its entrepreneurs?
The new administration shows clear indications of being more pro-business and pro-tech, which is highly promising. Additionally, it is likely the most pro-Israel administration we've ever had, which is also positive news for Israel. Overall, the environment for high-tech and the macroeconomic climate, particularly in Israel's case, is very favorable.
What are the three most important things the Israeli government should do today to accelerate the high-tech engine in the coming year?
First, there’s significant potential at the intersection of IT, healthcare, and biotech, but funding in these areas remains limited. From our perspective, the government could provide additional support and incentives to help drive innovation and growth in these sectors.
Second, ensuring good market conditions is critical. This includes maintaining stable government policies, ensuring safety and security, and fostering positive relationships with neighboring countries. Beyond this, improving Israel’s overall macroeconomic environment would naturally benefit the high-tech sector without requiring specific intervention in IT.
Finally, addressing the talent shortage in high-tech is vital. While Israel offers ample opportunities for individuals to learn programming, the industry still faces a workforce gap. Encouraging more people to enter high-tech could significantly boost the economy, given the higher salaries in this sector.
Government initiatives aimed at promoting high-tech careers, particularly among underrepresented groups like Arab-Israelis and ultra-Orthodox communities, could unlock incredible untapped potential. Not only would this help diversify talent pipelines, but it would also strengthen the broader economy by integrating more people into higher-paying industries.
Are there new sectors you see as relevant? Are there any fields you anticipate will weaken significantly in the coming year?
Israeli high-tech continues to evolve across multiple sectors. AI and cybersecurity remain strongholds, but it’s exciting to see more startups entering the B2C space, which has traditionally been less common in Israel. The growing interest and talent in building B2C companies are promising signs for diversification within the ecosystem.
Defensetech is also on the rise, driven in part by the war. Many skilled professionals are channeling their efforts into this sector, and international investors are showing significant interest in Israeli defense technology.
Additionally, the intersection of high-tech with healthcare and biotech is gaining traction. This area addresses critical global challenges, and while there are gaps in the ecosystem, the potential for growth is substantial. Supporting this sector could position Israel as a leader in solving complex healthcare and biotech problems.
As for sectors that might weaken, it’s hard to pinpoint one. Cybersecurity, for example, is undeniably overheated, but it still faces unresolved challenges. With ongoing innovation and exits, it’s likely to remain robust despite the high level of competition.
Is Israel missing out on the AI revolution in the global arms race? If not, what should the local industry focus on to join the global race?
Israel is definitely not missing out on the AI revolution. The country boasts exceptional talent and numerous innovative startups in the AI space. While foundational AI work, such as developing large-scale foundation models, isn't typically done in Israel, the local ecosystem excels in applications leveraging AI.
A good example of Israeli talent contributing to foundational AI is the work of companies like Ilya Sutskever's, who has established an R&D center in Israel. This highlights the global recognition of Israeli expertise in the field.
For the local industry to remain competitive, the focus should be on building transformative AI applications. Israel’s strength lies in applying AI to solve real-world problems across diverse sectors, and doubling down on these efforts will ensure it remains a vital player in the global AI arms race.
Could the global IPO drought end in the coming year?
I’m optimistic about the IPO market in 2025. The conditions look favorable, and there’s a significant pipeline of pre-IPO companies that have been waiting for the right moment to go public.
If the market remains stable and doesn’t experience any major crashes, I expect to see several IPOs early in the year. These initial offerings will set the tone. If they succeed, it’s likely to trigger a wave of additional IPOs. There’s a substantial backlog of companies prepared and waiting, so I anticipate a considerable number of IPOs in 2025. It could be a big year for public market activity. Fingers crossed.
From an investor's perspective: will the coming year be better for early-stage startups or more mature companies?
It’s not a straightforward comparison. Funding for mature companies in the past year has been challenging, but I anticipate improvement for growth-stage companies in 2025.
Early-stage startups, on the other hand, have been navigating a favorable funding environment, and I expect that trend to continue into the coming year. The macroeconomic environment currently looks optimistic, which means businesses are spending, making it easier for startups to sell their products and generate traction.
Overall, I believe 2025 will be a good year economically, benefiting companies across the spectrum. We are looking forward to it.
Did you raise fund money in 2024 for an existing fund or a new one? What are your expectations regarding this matter for 2025?
Yes, in 2024, we successfully closed our third fund and an Opportunity fund with a total of $160 million. It is focused on supporting early-stage startups, particularly those founded by Israeli entrepreneurs, as they scale and expand into the U.S. market.
In the past couple of years, less money has been raised compared to previous years, so it's still unclear how the situation will evolve in 2025. However, there is a significant amount of dry powder in Israel at the moment. As for us, we don’t yet have a clear plan to raise our next fund but will likely discuss it closer to the end of the year. For now, we’re not ready to speak about it just yet.
How many investments did you make in 2024, and how does it compare to previous years?
In 2024, we invested in four new companies. We also made follow-on investments in 11 of our portfolio companies — staying true to our vision of being a partner that can provide ongoing support for growth as needed.
This is the highest number of follow-on investments we’ve made in recent years — we made 6 in 2023 and 10 in 2022.
When it comes to new portfolio companies, though, other years fared better. We invested in 5 new companies in 2023 and 7 new companies in 2022. We believe it is part of the natural investment cycle and are looking forward to incorporating new promising ventures to our portfolio in 2025.
Provide an example of an intriguing investment you made in 2024. What sets this company apart, or what is distinctive about its sector?
I can highlight two new investments in Israeli companies: Bluebricks and BlinqIO.
BlinqIO developed the first ever AI test engineer - a synthetic test brain that has the intelligence of a human tester. BlinqIO is capable of receiving test requirements, and, based on these, writing test automation code autonomously as well as maintaining it against changes in the app. All is done without human intervention.
Bluebricks is a centralized management solution for Distributed Cloud. It allows enterprises to integrate AI into their cloud operation workflows securely and efficiently through its Atomic Infrastructure™ technology.
Two notable companies that you think will thrive in 2025. These can be from your portfolio or not.
Company Name: Cynomi
Sector + description of the product/service: Cybersecurity. Cynomi is a Herzliya-based vCISO platform provider for MSPs and MSSPs. The company’s innovative platform combines CISO-level knowledge and AI to automate many of the vCISO tasks, helping service providers achieve cyber resilience for their end clients – typically SMEs – at a fraction of the cost of hiring an in-house CISO.
Investment amount + total: Flint Capital invested $5.1M; $23.5M in total funding
Founding Year: 2020
Reasoning why this is their year: Cynomi is experiencing rapid growth, having already tripled its ARR, doubled its customer base and headcount, and is riding strong momentum.
Company Name: Antidote Health
Sector + description of the product/service: HealthTech. Antidote Health is a New York-based direct-to-consumer (DTC) tech healthcare company offering affordable, ACA-compliant health plans integrated with an AI telehealth platform and personalized guidance. Think of them as a UnitedHealth with the user-friendly experience of Amazon.
Investment amount + total: Flint Capital invested $4.2M; over $60M in total funding
Founding Year: 2020
Reasoning why this is their year: Antidote Health is going after a trillion-dollar market, disrupting healthcare insurance in the U.S. 2025 is the first year they are fully operational as a virtual HMO and they already generating tens of millions in revenue.
