Israeli Tech Investment Hits Record Lows in 2023, Except for Promising Climate and Agritech Sectors
Investor participation in Israeli tech startups has reached a nine-year low in the first half of 2023, according to a report by Start-Up National Central. Gathering data from information platform Finder, the report analyzed six key sectors in Israel’s startup ecosystem: cybersecurity, fintech, IT and software solutions, climate-tech, healthcare, and food and agriculture.
The findings paint a gloomy picture for Israeli tech, with private financing experiencing a significant decline. In the first half of 2023, private financing fell by 29% compared to the same period in 2022, reaching its lowest level since 2018 at NIS 39 billion. This is in stark contrast to the relatively stable private financing trends in the US market, as reported by PitchBook.
The report also highlights a nine-year low in investor participation in investment rounds during the first half of 2023. The number of investment rounds dropped by 53% compared to the corresponding period in 2022 and decreased by 24% compared to the second half of 2022. Interestingly, international investors led the majority of investment rounds, starting 70% more rounds than their Israeli counterparts.
The slowdown in Israel’s tech industry is also evident in mergers and acquisitions, with the IPO market at its lowest point since 2018. M&A activity experienced a decline of 64% compared to the first half of the previous year and a decline of 53% compared to the second half of 2022, with a total activity volume of $1.3 billion.
Furthermore, the fintech sector in Israel has also been heavily affected by the downturn. Total investments in the sector during the first half of 2023 amounted to merely $545 million, a significant decrease from $2.6 billion in the same period in 2022 and $6 billion in the first half of 2021.
The IT and software solutions sector has also suffered, with private investment falling by 66% to $450 million in the first half of 2023, compared to $1.34 billion in the first half of 2022.
Despite the overall decline, the report does identify some bright spots in the Israeli tech landscape. The climate-tech sector, for instance, saw an increase in both private and public funding, totaling $900 million in the first half of 2023, up from $700 million in the corresponding period last year. This stability is attributed to the growing demand for technological solutions to combat carbon emissions and increased corporate involvement in the field.
Similarly, the agritech sector maintains stability, with investments in advanced rounds remaining constant. In the second quarter of 2023, the volume of investments in agritech doubled compared to the previous quarter. Additionally, despite the fall in investments, the fintech industry has witnessed a wave of strategic collaborations with large companies, leveraging artificial intelligence and representing high growth potential.
Overall, Start-Up National Central’s report paints a challenging picture for Israeli tech investment in the first half of 2023. While the industry as a whole experiences record lows, the climate and agritech sectors offer promising prospects for investors. As the market conditions continue to fluctuate, the Israeli tech ecosystem strives to adapt and find stability amid global economic changes.
