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VC, Investments

Israeli startups raise decline to $5.6 billion In the first quarter of 2022 

 Key findings:

  • 212 transactions were recorded in the first quarter of 2022, with an average transaction value of $26 million, down from the quarterly average in 2021.
  • The 14 mega-deals of more than $100 million each in the first quarter of 2022, accounted for 44% of the total amount raised, demonstrating foreign investors’ diminished engagement in subsequent rounds.
  • As Nasdaq’s growth company prices crashed since November 2021, Israeli startup investment activity fell in the first quarter of 2022, from fourth-quarter 2021 levels. But up from $5.4 billion in 174 transactions in the first quarter of 2021.
  • 39 exits occurred in the first quarter of 2022, as the number of Initial Public Offerings (IPOs and Follow-ons) decreased dramatically.

According to IVC-LeumiTech Israeli Tech Review publish Wednesday, in the first quarter of 2022, Israeli high tech startups raise $5.6 billion in 212 transactions up from $5.4 billion in 174 transactions in the same quarter of 2021. Although the investment activity in the first quarter of the year fell short of the $8.1 billion in 214 rounds recorded in the fourth quarter of 2021. That was to be expected, given that the last quarter of the year is generally bustling with mega-deals that close before the year’s conclusion.
So, concerns about a probable major decline in investment for Israeli startups companies in 2022 appear to be premature.

in the first quarter of 2022, early rounds (Seed and Series A) generated $1.2 billion in 135 deals, with the median amount reaching $4.6 million. The value of foreign investments decreased quarter over quarter, reaching $4 billion, in line with the quarterly average for 2021. This fall – primarily in subsequent rounds of investment – was the key reason for the decline in investment in Q1, although Israeli investment remained nearly unchanged.

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Cybersecurity raises $1.8 billion and fintech $985 million showing dominance in the market. Foodtech startups raised an astounding $341 million, more than doubling the $148 million raised in the first quarter of 2021.

Unsurprisingly, the number of initial public offerings (IPOs) decreased, as unfavorable sentiment in the United States’ public markets discouraged companies from going public.

While the average and median sums raised were lower, there were 14 megadeals worth more than $100 million each accounting for 44% of total capital raised in the period. This maintains a trend from 2021 when 20 deals accounted for 54% of total capital raised in the first quarter of 2021, and 25 rounds accounted for 63% of overall funding in the fourth quarter of 2021.

Timor Arbel-Sadras, CEO of LeumiTech explained: “After a phenomenal year for the Israeli high-tech it seems as though 2022 started more restraint. Furthermore, it seems that investors have slowed pace and are waiting for a correction in valuation in the private sector same as happened in the public sector. VC managers need to react to these corrections and make sure their funds keep presenting good performances. These performances rely on the ability to sell or issue their portfolio companies with a substantial increase in valuation versus the investment stage.

“It is unclear yet”, Arbel-Sadras added, “if this recognition has already penetrated throughout the ecosystem: there are many cases with a large gap between the Bid and Ask prices in investment and acquisition deals that cause a slowdown in the closing pace and a demand increase in raising private debt. We witness a decrease in the number of IPOs and we expect to see again the dominance of M&As in Exits deals. M&A deals will include both mature startups as an alternative to IPO and also acquisition of early-stage startups by matured ones as an engine to inorganic growth at attractive valuations”.



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