Israel’s Tech Ecosystem Stays Strong Despite War Setbacks

Jerusalem, 31 March, 2024 (TPS) -- Despite the uncertainties of war Israel’s tech sector has shown resilience, with private investment rounds, mergers and acquisitions and the establishment of new funds continuing to thrive since October 7, according to findings from two studies released on Sunday.

High tech is a key Israeli economic sector. According to new Finder spotlight research by Startup Nation Central, high-tech drives 14% of Israel’s GDP and 30% of the country’s tax revenues. Startup Nation Central is a Tel Aviv-based non-profit that promotes Israeli startups and innovation.

In a separate joint analysis by the IVC Research Center and Bank Leumi, preliminary findings reported that Israeli tech companies raised $1.6 billion in the first quarter of 2024, a 10% increase from the previous quarter and 10% less compared to Q1/2023. The number of early-stage rounds (Seed Rounds+A) increased to 80 in Q1/2024, compared to 54 rounds in Q4/2023.

The full IVC-Leumi report will be published in April.

According to the Startup Nation Central report, Israeli high-tech encountered hurdles immediately after Hamas’s October 7 attacks, with approximately 15% of the workforce being drafted into military reserve duty, smaller startups — particularly those with limited runways — also faced short-term funding gaps.

But despite these obstacles, the Israeli tech ecosystem has persisted, attracting investors and maintaining activity in venture capital funding. Mergers and acquisitions since October 7 stands at $3.7 billion.

In addition, 220 rounds of private investment have raised $3.1 billion. According to the report, the average investment amount stood at $19 million, with standout investments including Next Insurance, which secured $265 million from two foreign venture capital firms. Notably, the health tech, enterprise software solutions, and security technologies sectors led in both the number of rounds and the amounts raised.

Two substantial M&A deals approached $1 billion each, with an additional nine acquisitions surpassing $100 million. Security technology dominated the M&A landscape, with notable acquisitions including Talon Cyber Security, Dig Security, Avalor, and Gem. Health tech also saw significant activity, with CartiHeal’s acquisition totaling $330 million.

Moreover, more than 20 new funds have been launched since October 7, raising a total of $1.7 billion. Notably, 11 of these funds were specifically created to address the urgent funding needs of startups impacted by the conflict, underscoring a commitment to supporting innovation during challenging times.

“Israel continues to attract investors looking for solutions to shared global challenges with high potential opportunities. With attractive valuations and significant growth potential, the Israeli tech ecosystem is showing characteristic resilience,” said Startup Nation Central’s CEO Avi Hasson. “I anticipate seeing a new wave of innovation – a ‘startup baby boom’ of tech companies – which will create even more dynamic opportunities for our sector after this war.”