Cybersecurity firms helped Israel’s high-tech sector rebound in the first half (H1) of 2024, after a decline that came at the end of 2023 in the aftermath of the October 7 Hamas massacre and the ensuing war in Gaza. For example, private funding rose by 31% in H1, amounting to $5.1 billion raised across 322 different new funding rounds. This is according to a report issued by Startup Nation Central, a non-profit that promotes the Israeli innovation ecosystem around the world, published a report of the first half of 2024 in Israeli tech.
Startup Nation Central reported that the rebound in private investment in Israeli startups in H1 resulted from what it called “Mega Rounds,” exceptionally large funding rounds made by a few new firms.
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It is further estimated that the $5.1 billion figure for funds raised in H1 2024 could reach $6.7 billion when accounting for unreported rounds and undisclosed amounts. The second quarter (Q2) was especially strong, with funding rising from $1.8 billion in Q1 to $3.3 billion in Q2, reported Startup Nation Israel. Fourteen mega-rounds (above $100 million) contributed $2.8 billion, representing 56% of total private funding, overshadowing weaker sectors and needed funding for many early-stage and mid-stage companies.
M&A exits in H1 2024 surged to $4.1 billion with fewer deals, a 70% increase from H2 2023. This marks the highest value since 2018, excluding H2 2021, continuing an upward trend from H1 2023.
Israel’s private funding growth of 31% in H1 2024 outpaced other regions. The US saw a 28% increase, while Europe and Asia experienced declines of 6% and 18%, respectively. Israel’s significant Q2 surge was notable globally, contrasting with more gradual trends elsewhere.
The investment landscape featured 217 active investors, with 54% being Israeli. Global investors participated in rounds accounting for 93% of all funding, a seven-year peak. Leading global investors Insight Partners and NFX Capital each had seven rounds, while Sequoia and Benchmark reopened local offices.
Startup Nation Central credited Israel’s cybersecurity sector as having played a “crucial role in the Israeli tech ecosystem,” representing 52% of private funding in H1 2024. This prominence was highlighted by Israeli cybersecurity firm Wiz’s record $1 billion funding round.
Israeli cybersecurity firms’ M&A exits totaled $1.5 billion across 9 deals, accounting for 35% of the 2024 H1 exits.
“The recent risks coupled with the local environment in Israel were overshadowed by growth in mega-rounds and cybersecurity. One might expect the ‘Israeli factor’ to have a stronger impact on the Israeli tech activity, but the data suggests otherwise,” commented Startup Nation Central CEO Avi Hasson.
However, Hasson also explained that Israeli startups in popular sectors continue to secure funding, while early-stage and early-growth companies in less-trending areas face greater funding challenges.
Examining the global trends in cybersecurity funding reveals a notable divergence between the US and Israel. In 2018, cybersecurity accounted for 20% of the funding in both ecosystems. Over the years, the share in the US declined to approximately 13%, while in Israel, it grew to 25%. By H1 2024, cybersecurity funding in Israel had surged to just over 50%.
“The consolidation of solutions worldwide has led to an acquisition spree by the sectors leading companies,” said Startup Nation Central. “We feel this global competition strongly in our ecosystem because we have a relative advantage in cybersecurity. However, if the ecosystem remains overly dependent on cybersecurity in the long term, it risks missing out on other significant trends and opportunities.”
