As I’ve shared on VC Cafe in the past, Israeli startups (and venture capital) suffered a number of blows since the peak funding of 2021 which saw capital raising levels cross the $26 billion mark. First came the stock market slump, which affected late stage funding, then came the VC pull down (2023 was one of the lowest points for global VC deployment) and it was made even worse following the judicial reform (which was scraped) that gave some foreign investors cold feet. If that wasn’t enough for 2023, October 7th and the war that followed (and is still ongoing) slowed things down even further, for Israeli tech and venture.
The Israeli tech review for Q1 2024 (by LeumiTech and IVC Data and Insights) is out and it shows signs of recovery. Israeli startups raised $1.74 billion in Q1 2024, just 1% less than Q1 2023. While the investment level was still well below the peak levels of 2022, it is showing signs of stabilisation. Particularly, the fact that Q1 2024 had more seed rounds than each of the 3 previous quarters in 2023.
The number of deals closed climbed to 113, reversing the downtrend since Q1 2022. This uptick was primarily driven by a surge in early-stage investments, with 51 seed deals accounting for nearly half of all transactions. Seven mega-rounds over $100 million each captured 49% of the total capital for the quarter, demonstrating that investors still have an appetite for ambitious Israeli innovators.
The cybersecurity sector led the charge, netting $630 million across multiple large rounds, including $400 million for unicorns Axonius Solutions, Coronet, and Claroty. Other hot verticals included fintech, IoT, and digital media.
On the exit front, M&A activity remained muted but stable, with 23 acquisitions fetching $2.92 billion. Notably, there were no Israeli IPOs in Q1 amid the prolonged public market drought.
While a single quarter doesn’t make a trend, the Q1 2024 figures offer a glimmer of hope that the funding winter may be thawing for Israeli tech. As startups continue demonstrating grit and performing #NoMatterWhat, global investors are doubling down on the Startup Nation’s innovation prowess, we may be headed toward sunnier skies. As NFX’s Gigi Levy recently put it, Israeli entrepreneurs going through these tumultuous times are being battle tested and demonstrating real leadership under pressure.
Learn more in the full report.
I'm a former general partner at google ventures, head of Google for Entrepreneurs in Europe and founding head of Campus London, Google's first physical hub for startups.
I'm also the founder of Techbikers, a non-profit bringing together the startup ecosystem on cycling challenges in support of Room to Read. Since inception in 2012 we've built 11 schools and 50 libraries in the developing world.
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