According to a new report, Israel’s high-tech industry is managing to maintain its strength thanks to clutch investment activity.
Israel’s high-tech sector, which accounts for almost half the country’s total exports, remains strong despite the October 7th massacre and the war in Gaza, according to a new report from Startup Nation Central (SNC).
According to the Israeli innovation-focused non-profit, Israeli tech is showing characteristic resilience, and Israel continues to attract investors and venture capital funds activity.
It’s all about Investments
Total investment fell 28% compared to the previous six months – largely in line with a similar decline in the US – but the value of mergers and acquisitions (M&As) more than doubled. Furthermore, prospects for after the war are encouraging.
Investment rounds, primarily from overseas, are the lifeblood of tech companies in the Startup Nation. A total of 220 private investment rounds have been announced in the six months since October 7th with an estimated $3.1 billion raised, says the report. Over a third of those are in security technologies, the industry’s largest single sector.
By comparison, in the six months before October 7th (April to September, Q2 and Q3 of 2023) there were 330 rounds, raising a total of $4.3 billion.
Next Insurance, which develops easy insurance solutions for small businesses, attracted the biggest single investment round since October 7th, of $265 million, followed by cybersecurity company Axonius ($200 million) and VAST Data ($118 million). Overall investment in Israel’s startups fell less than in the US since mid-2022 and even since October 7th the decline had been only slightly worse.
The number of M&As before and after October 7th barely changed (25 and 26 respectively) but the value in the six months after leapt from $1.4 billion to $3.7 billion.
Nine acquisition deals of over $100m have been finalized since October 7th, six of them in security technologies. The biggest was the acquisition of Resident Home, which sells furniture direct to consumers, to US-based Ashley Home for $1 billion.
“Despite recent challenges, Israel’s tech industry is not just surviving; investment flows and VC activities have remained robust, proving the sector’s unflagging innovation excellence,” the report says.
“In fact, when compared to the US market, Israeli tech investment trends mirror those of its American counterpart, reaffirming its global standing even in turbulent times.”
Filling the gaps
The tech sector lost 15% of its workforce due to calls from the IDF (Israel Defense Forces) to report for reserve duty in the immediate aftermath of October 7th and suffered many short-term funding gaps. Thousands of Israel’s smaller startups have a short “runway” – the time can operate and pay staff before they run out of cash.
More than 20 new funds have been established since October 7th, half of them specifically designed to address urgent startup funding needs due to the impact of the war. These funds have collectively raised over $1.7 billion.
“Israel continues to attract investors looking for solutions to shared global challenges with high potential opportunities,” said Startup Nation Central’s CEO Avi Hasson.
“With attractive valuations and significant growth potential, the Israeli tech ecosystem is showing characteristic resilience,” he said. “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.”
Originally Posted at israel21c.org