Israel Startup Nation saw a massive 73% drop in VC capital fundraising for the year 2023, compared to 2022, marking the lowest levels since 2015. This is according to a new report issued by IVC Research, Gornizky, KPMG Israel and the Israel Innovation Authority. Clearly, the bad news is directly related to Israel’s Iron Swords War against Hamas terrorists in Gaza that was sparked by the barbaric Hamas massacre of more than 12,000 innocent Israelis on October 7, 2023.
Also, only 21 Israeli VC funds succeeded in raising a mere $1.52 billion in total in 2023. This marked a 66% drop in the number of funds. Three VC funds accounted for 51% of the total capital, raising over $200m each: Qumra Capital IV, TLV Partners V, and Viola Growth IV. According to IVC’s measuring model of Israeli VC funds allocations and capital availability, 2023 concluded with $1.14 billion, reflecting the lowest Israeli VC fund capital allocation volume since 2015.
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IVC’s CEO Ben Klein said, “The Israeli tech ecosystem struggles to overcome one of the worst crises in the last three decades. In IVC, we believe that a profound study of the investors’ data mirrors our challenges and suggests an opportunity to learn new ways to move forward successfully.”
The 2023 IVC – Gornizky – KPMG Israel and the Israel Innovation Authority Investors Report examines the trends and activities of investors in the Israeli tech ecosystem. The report analyzes fundraising and investment activity by Israeli VCs, the availability of capital for local tech ventures (Dry Powder), foreign VC funds, Israeli and foreign corporate VC funds, and Israeli institutional investors.
Analysis of the most active VCs by First Investments in Israeli high-tech companies, they reported, revealed a notable decrease in Israeli portfolio expansion by foreign VCs. Samsung Next, Longevity Venture Partners, and NFX led the first investments in 2023, compared to 2022 when four foreign funds accounted for more than 12 first investments each. The most active Israeli VCs in 2023 were Fusion (a micro-fund), with an exceptional 23 first investments, followed by investment platform OurCrowd and micro-fund Fresh Fund.
The Israeli VC ecosystem includes 226 active VC management companies (MCs). The largest 24 Israeli MCs, each with over $500m under management, have an estimated total of over $29 billion under management.
According to the Investors Report, Israeli venture capital funds have an estimated $10.08b remaining for investments in Israeli tech companies. Approximately $2.38b (24%) is available for new investments, while $7.7b (76%) is allocated for existing portfolio companies.
In 2023, Israeli institutional investors contributed an estimated $143 million in direct investments in Israeli tech companies (depending on the final institutional activity report, this number may vary by up to 20%), a notable 70% fall from $486 million in 2022. The number of deals dropped by 55%.
Dina Pasca Raz, Partner and Head of Technology, KPMG Israel: “2023 marked a year of profound challenges for the high-tech and venture capital sectors, primarily due to significant macroeconomic shifts worldwide. Despite these hurdles, the Israeli tech ecosystem, from start-ups to mature companies, from defense corporations to local R&D centers of the largest multinational, showcased exceptional resilience.”
Gornitzky GNY
Gornitzky GNY law firm stands out as one of Israel’s premier law firms, boasting a robust team of over 265 lawyers specializing in 50 diverse areas of legal expertise.
KPMG Israel
KPMG Israel, a leading firm in accounting and business consulting with over 1,600 experts, blends local insights with global trends.
The Israel Innovation Authority
The Israel Innovation Authority is an enabler of everything related to the Israeli innovation ecosystem. It provides conditional grants to support disruptive technological innovations.
IVC
Founded in 1997, IVC Research Center is the leading data source and business information company in Israel’s high-tech industry.
