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A spark of cautious optimism — that’s how Start-Up Nation Central sums up 2023 and looks ahead to 2024 in its new annual report. “The report’s findings testify to the resilience of the technology ecosystem despite a volatile year.” The big picture is that Israel maintains its position as a global innovation center. All this maintains the status of high-tech as an economic pillar of Israel,” SNC points out.
The 2023 figure provided by SNC, which connects local startups with foreign financial and strategic investors, is slightly higher than the figure published in the corresponding report. However, this has been a long-standing feature of the organization, as the annual figures also factor in transactions that have not yet been officially closed or reported. According to SNC statistics, total investment in Israeli startups was $9.9 billion, down 50% compared to 2022 and well below the all-time high of $30 billion. However, this is still only a return to 2019 levels, which was not a bad year for Israeli tech companies on the eve of the coronavirus pandemic.
The report says $7.9 billion in funding has already been reported, and an additional $2 billion is expected to be raised in 2023, according to information available to the organization. It is widely believed that many companies avoided reporting on their funding rounds. Some of the rounds that are already closed due to the situation in Israel and are closed in principle are signed for entrepreneurs who find it difficult to fly abroad or who are in the reserves of the Israel Defense Forces. do not have.
The report shows that despite the war, capital raising activity for Israeli high-tech companies maintained its level throughout the year, at about $2 billion per quarter.
Even if 2023 was a kind of lost year for Israeli tech companies, the first nine months of which were busy with protests against the judicial coup and the last three months of ongoing war, Israel Understanding emotions is more important than ever. Investors today. Israel’s ecosystem relies on foreign funding bodies, which are responsible for the bulk of the investments here, and their reluctance to invest in Israel in view of the instability of 2023. There are concerns that this may be the case. It is here that SNC provides the main optimistic news. Looking ahead to the next year, we found that 88% of international companies plan to maintain or expand their presence in Israel, a fact that shows confidence in the ecosystem. Nevertheless, expectations for M&A and IPOs are encouraging, with key sectors such as artificial intelligence, cybersecurity and defense technology expected to continue their upward trend. ” This statement is based on a survey conducted by SNC last November among more than 100 investment organizations and companies active in Israel’s high-tech industry.
In addition to their commitment to maintain a physical presence in Israel, 67% of respondents from international companies said they will enter into new contracts in Israel this year, half of them in mergers and acquisitions, and the other half in It emphasized partnership. Among multinational companies with research and development centers in Israel, the majority do not plan to relocate employees there. 21% plan to expand significantly, and only 12% are considering scaling back their operations in Israel. However, 37% of respondents expect private financing to decline moderately in 2024, while 15% think it will decline significantly. Compared to 2023, he expects funding to increase significantly in 2024 by only 8%.
This report confirms what has been said behind closed doors throughout the past year. Surprisingly, while foreign companies continued to invest, it was local VC funds that significantly reduced their investments. As proof of that, the proportion of funding rounds led by foreign investors actually increased from 30% to 44%. Insight Partners, which was the most active overseas fund over the past few years, has been replaced by Lightspeed and Samsung Next. The most active Israeli fund was Avi Eyal’s Entre Capital, followed by OurCloud and Pitango.
In Israel, the tech industry is thought to consist primarily of cyber and fintech companies, but the SNC report shows that the largest number of startups in Israel actually belong to the health tech industry. . Currently, the organization’s database includes 1,623 companies in the medical field, the same number of cyber companies, 458 fintech companies, and 1,047 start-ups dealing with enterprise software and computing infrastructure. . In addition, 923 companies are engaged in climate technology and a further 673 companies are engaged in agricultural technology. However, funds are distributed almost inversely to the number of companies. Last year, the cyber sector received $1.9 billion in funding, with an average round of $27.1 million, while the average round for health tech was just $12.7 million.
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