Israeli startups raise $1.45 billion in Q4 despite war, end 2023 with $6.9 billion in total
Israeli startups raise $1.45 billion in Q4 despite war, end 2023 with $6.9 billion in total
The fundraising activity in 2023 was similar to 2018-2019. The data reflects a 44% decrease in the number of deals and a 56% drop in the amount of raised capital compared to 2022
The past year was anything but straightforward for Israeli high-tech. It commenced with a severe global industry crisis and a local judicial coup and is concluding with an ongoing war. Despite these challenges, Israeli high-tech startups successfully secured total funding of $6.9 billion in 392 rounds this year, compared to $14.95 billion in 2022 across 663 rounds, according to preliminary data from the IVC and LeumiTech report summarizing 2023 in the Israeli tech sector.
While this marks a considerable drop from 2022, the second-best year ever for Israeli high-tech, it still qualifies as a success given the prevailing difficulties. In the fourth quarter, which includes of course the war that broke out on October 7, companies raised $1.45 billion in 75 rounds. The impact of the war is most noticeable in the reduced number of rounds during the quarter, as many companies had to contend with investors suspending fundraising rounds unexpectedly while awaiting developments in the context of the war.
The preliminary report suggests that the funding figures for 2023 in total align with the numbers of the pre-Covid era of 2018-2019. The data indicate a 44% decrease in the number of rounds compared to 2022 and a 56% decrease in fundraising amounts. The fourth quarter continues the downward trend that began in the first quarter of 2022 after a short period of stabilization in the second and third quarters of this year. The volume of fundraising in the fourth quarter decreased by 15% compared to the third quarter, and the number of fundraising rounds decreased by 16%.
Investment volumes in Seed rounds, an indicator of investor confidence in high-risk new companies and their development potential, continue the upward trend from earlier in the year. Funding in these rounds amounted to $220 million compared to $365 million in the fourth quarter of 2022. The number of rounds in the last quarter was 31, relatively low compared to previous quarters.
Analyzing investor identity, it appears that the conflict in Gaza did not deter foreign investors, and their involvement in transactions increased at a relative rate, continuing the trend from the beginning of the year. This is in contrast to a continued decrease in the participation of local investors in transactions during the current quarter. The presence of foreign investors is a positive indication of the availability of funds for investments. In the fourth quarter, foreign investors were involved in 272 investment transactions compared to 441 in the corresponding quarter in 2022, while Israelis were involved in 195 compared to 397 rounds in the corresponding quarter in 2022.
The CEO of LeumiTech, Mia Eisen-Tzafrir, said: "Following global trends in the tech market, the year 2023 reflects a return to the levels of investment and volumes of activity we saw in 2018 and 2019 - before the peak years of relative anomalies in 2020-2022. The difficult events and the fighting of the challenging global macro environment in the last few months have raised the challenge for Israeli high-tech in the global environment. The fourth quarter data show a relatively moderate decrease of 15% and a clear increase in the investment figures in the Seed stages, which are an indication of the high durability of the Israeli high-tech industry and an important reminder of the role this sector in the Israeli economy has especially these days."
