The Israeli hi-tech industry is facing significant challenges in 2023 due to a global economic downturn, political instability, and the aftermath of the Swords of Iron war. The Start-Up Nation Policy Institute (SNPI) annual report reveals a 60% drop in investments and foreign venture capital funds showing hesitancy towards Israeli startups.
Investments in Israeli hi-tech have plummeted by 60%, reaching $7.3 billion in 2023, taking the industry back to 2018 investment levels. The number of fundraising rounds has also declined by 40% compared to the previous year.
The Swords of Iron war has had a major impact on Israeli startups, resulting in only $1.3 billion raised in the final quarter of 2023, the lowest quarterly amount since 2017.
Compared to the United States and Europe, Israel has experienced a higher year-on-year investment decrease at 58%. Seed funding has also dropped by 50% compared to 2022 levels. Additionally, 42% of foreign venture capital firms chose not to invest in Israeli startups in 2023.
Prof. Eugene Kandel, chairman of SNPI, emphasized the severity of the situation and called for a unified government response to prevent a irreversible decline. He suggested establishing a comprehensive task force in collaboration with the hi-tech industry and civil society.
Uri Gabai, CEO of SNPI, stressed the importance of 2024 as a pivotal year for the Israeli hi-tech sector. He warned of the risks of missing out on the AI revolution and highlighted the significance of a world-leading hi-tech sector for economic and national resilience.
The SNPI report outlines four critical questions that will shape the future of the hi-tech industry:
1. How will the security and geo-political situation affect the sector?
2. Can Israel maintain its technological edge in the age of artificial intelligence?
3. Can the industry increase its human capital?
4. Will Israel’s innovation policy meet the challenges faced by the industry?
The report underscores the need for prompt and comprehensive action from the government and the industry to secure the recovery and long-term success of the Israeli hi-tech sector. Strategic policymaking, industry collaboration, and a resilient response to the challenges ahead will determine the future of the industry.
