The Israeli Institutional Investors’ Tech Investments Report for the year 2022 was released and it has some depressing numbers. But it also shows optimism for Israel Startup Nation in 2023. The report was compiled by IVC, Arnon Segev & Co. and Consiglieri with some help from the Israel Innovation Authority.
The report covers the period beginning January 1, 2020, and ending December 31, 2022. The report includes several Israeli entities whose activities were conducted under the Israel Innovation Authority’s Institutional Investors Incentive Program (see slide 8, Innovation Authority’s explanation and analysis). The report’s methodology relates to the number of deals the Israeli institutional investors took part in and not to the number of investments each investors made. For example, in 2021, institutional investors took part in 110 deals, but made 155 investments overall (some of the deals included more than one institutional investor).
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The main finding of the report is that Israeli institutional investment activity in the local tech market in 2022 failed to achieve the record levels of 2021, with investments reaching slightly over $500 million – a 40% decrease from the $1.12 billion allocated to Israeli tech in 2021.
Also, the report states that for the first time since 2020, Q4/2022 follow-on investment numbers in Israel Startup Nation came much higher than the first investment numbers. “This dramatic change in institutional investors’ investment patterns,” said the authors, “served as a signal for investors’ lack of appetite for new risks (investments) and preferences to remain focused on available portfolios.”
And Israeli institutional investors did not abandon the tech ecosystem and directly invested over a half a billion dollars in Israeli start-ups during 2022, which is still more than 3 times the total amount invested in 2020. This indicates that institutional investors’ increasing involvement in the Israeli tech ecosystem was not a one-time phenomenon.
“Overall, despite the current economic challenges,” say the authors, “we believe that investing in Israeli tech startups remains a compelling opportunity for institutional investors seeking exposure to a high-growth sector with significant potential for impact and financial returns.”
The report explains, however, that the 2021–2022 period was a “challenging one for Israeli institutional investors” because of the effects of the global financial crisis. So, Israel was not alone in this regard, especially in 2022.
While they do not expect 2023 to offer a repeat of the success Israel Startup Nation experienced in 2021 – a success that resulted from the new opportunities that came with the end of the Covid crisis – the report’s authors do say that this year will, be better than the last.
