Israeli startups raise US$1.5 billion in Q4, US$7 billion in 2023

ISRAELI high-tech firms raised US$1.5 billion in the fourth quarter of 2023, preliminary data showed on Thursday (Dec 28), in a sign that foreigners are still investing in the country’s startups despite Israel’s war with Palestinian militant group Hamas.

The IVC Research Center and LeumiTech said fundraising in the quarter up until Dec 26 dipped 15 per cent from Q3, but 75 deals were done. The war began on Oct 7.

Early stage seed funding was US$220 million in 31 rounds.

The report said that foreign participation rose in Q4 after a decline earlier in 2023, saying “the presence of foreign investors is a significant indication of the availability of funds for investments”.

Last week, a group of 70 US tech executives came to Israel in a show of support.

LeumiTech chief executive officer Maya Eisen Zafrir said the Q4 data was “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”.

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High-tech accounts for 12 per cent of employment, more than half of Israel’s exports, 25 per cent of income taxes and nearly a fifth of its overall economic output.

At least 15 per cent of the tech workforce has been called up for military reserve duty.

Overall, Israeli startups raised about US$7 billion in 2023 versus close to US$16 billion in 2022 – mainly in the first half of the year before the global economy began to slow.

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In addition to a drop in funding due to the economy, foreign investors were spooked by Israel’s plan to overhaul its judicial system, a proposal that has since been shelved.

Eisen Zafrir said that 2023 reflected a return to the levels of investment and volumes of activity from 2018 and 2019 – before the peak years of relative anomalies in 2020 to 2022. Tech fundraising in Israeli startups reached US$26 billion in 2021, in 779 rounds.

IVC CEO Ben Klein said 2023 was challenging for the Israeli economy and high-tech.

“The results of the entire year, especially the fourth quarter, support an optimistic approach towards the local industry,” he said. “Despite the complexity, foreign investors’ participation level is a clear sign of the attractiveness of Israeli high-tech companies, even in difficult times”. REUTERS