Israeli high-tech funding continues to fall, but there’s light at the end of the tunnel
Israeli high-tech funding continues to fall, but there’s light at the end of the tunnel
Startups raised $1.676 billion in the not-yet-concluded third quarter of 2023, a 38% decrease compared to the corresponding quarter in 2022. However, in comparison to the second quarter, there was only a 14% decrease in fundraising volume, and after five consecutive quarters of decline, Seed investments are on the rise
Israeli high-tech companies raised $1.676 billion in the not-yet-concluded third quarter of 2023 in 85 deals, the IVC Research Center and LeumiTech said in a report. The fundraising amount reflects a 38% decrease compared to the corresponding quarter in 2022 when companies raised $2.7 billion. Additionally, there was a 41% decrease in the number of transactions compared to the corresponding quarter last year.
Israeli tech companies have raised $5.3 billion so far this year, with $1.9 billion coming in the second quarter. In all of 2022, tech firms raised nearly $16 billion, mainly in the first half before the global economic slowdown, higher interest rates and weak stock markets hit.
However, when comparing the third quarter of 2023 to the previous quarter, there was only a 14% decrease in fundraising volume, and minimal change compared to the first quarter. The first three quarters of the year indicate stabilization at around $1.7-$1.9 billion per quarter, and an annual total of approximately $8 billion.
"We continue to see in the third quarter data the first signs of stabilization in the amount and scope of fundraising, data that bring us back to the levels of 2018-19," said LeumiTech CEO Maya Eisen Zafrir.
"In addition, we recognise a stabilization in the rate of follow-on investments, an indication that the companies are beginning to adjust their value to the new interest rate environment."
In the third quarter, the figure for transactions by foreign investors declined slightly compared to the second quarter, but it still supports the ongoing trend of stabilization. The report shows that foreign investors made 319 investments in the last quarter, compared to 355 investments in the second quarter and 298 in the first quarter.
A positive trend is also observed in Seed fundraising rounds, which signify investor sentiment towards taking risks in startup companies and the ability of new companies to thrive. After five consecutive quarters of decline, the amount of capital raised in these rounds increased in the third quarter. Although the number of rounds is slightly lower than in the second quarter, the end-of-quarter numbers are expected to show a change in this trend as well. According to the report, $143 million was invested in 40 companies, compared to $107 million in 40 companies in the second quarter and $188 million in 36 transactions in the first quarter of 2023.
