Funding in Israel High-Tech Sector Drops Significantly in 2023

Israeli high-tech firms have secured $1.5 billion in fund-raising during the fourth quarter of 2023, data released on Thursday said.
VC funding for techThe report, presented by the Israel Venture Capital (IVC) Research Center and LeumiTech, highlighted key insights into the industry’s financial landscape until December 26, showcasing a 15 percent decrease in fundraising from the preceding quarter but marking 75 successful deals.

Notably, early-stage “seed” funding captured $220 million across 31 financing rounds, reflecting continued support for budding innovations within the sector.

Foreign investor involvement, which witnessed a decline earlier in 2023, experienced a notable resurgence in the fourth quarter. The report underscored this trend as a substantial indicator of available investment capital for the industry’s growth.

Recently, Israel hosted a delegation of 70 U.S. tech executives, signaling a display of solidarity and support for the country’s tech ecosystem.

Mia Eisen-Tzafrir, CEO of LeumiTech, emphasized that the fourth-quarter data serve as a testament to the enduring strength of Israel’s high-tech industry.

The high-tech industry in Israel stands as a crucial contributor, accounting for 12 percent of employment, more than half of the nation’s exports, a quarter of income taxes, and nearly a fifth of its overall economic output. However, approximately 15 percent of the tech workforce has been called up for military reserve duty.

Despite the positive trajectory in Q4 2023, the year’s total fundraising for Israeli startups amounted to around $7 billion, compared to nearly $16 billion in 2022. This decline largely occurred post the first half of 2023, coinciding with a global economic slowdown.

Several factors influenced the drop in funding, including economic conditions and foreign investor apprehension sparked by Israel’s proposed judicial system overhaul, which has since been shelved.

Eisen-Tzafrir contextualized 2023 as a return to investment levels observed in 2018 and 2019, noting the departure from the anomalous peaks witnessed in 2020 to 2022. In 2021, Israeli tech startups secured a staggering $26 billion across 779 fundraising rounds.

Ben Klein, CEO of IVC, acknowledged the challenges faced by the Israeli economy and high-tech sector in 2023. However, he remained optimistic, citing the fourth quarter’s performance as a testament to the enduring appeal and attractiveness of Israeli high-tech companies, even amid challenging economic conditions, Reuters news report said.

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