Israeli high-tech investment picture unexpectedly rosy

Israel is fighting a two-front war, tens of thousands of citizens have been displaced and businesses are suffering as workers have been killed, injured or serving as military reserves.

And yet, IVC Research Center and LeumiTech reveal that in the first half of 2024, the total amount and number of transactions increased for the first time since the second half of 2021.

In the first half of 2024, Israeli and “Israeli-linked” (not registered in Israel but with Israeli management and founders) technology companies raised $4.78 billion in 226 deals.

The report notes that the increase wasn’t just the result of Wiz’s $965 million funding round in May. Even without that mega-deal, total capital raised in H1/2024 was 19 percent higher than in H2/2023, with a 3% year-over-year increase.

On a quarterly basis, Q2 2024 was the first since Q1 2022 in which both the amounts and the number of transactions exceeded the results from the same quarter and the previous year.

“So far, 2024 looks positive compared to 2023, after a two-year downtrend,” the report reads.

Early rounds (seed and A) began to increase in Q4 2023, and this growth continued into the year. In H1 2024, early rounds totaled $1.18 billion across 163 deals, compared to $818 million across 114 deals in H2 2023.

In Q2/2024, six mega deals (over $100 million each) accounted for almost 60% of the total for the quarter. Excluding the outlier Wiz deal noted above, Q2 deal amounts and volume were similar to Q1.

The report indicated that Israeli cybersecurity startups performed well in the first half of 2024, mainly due to megadeals: Wiz ($965 million), Cyera ($300 million), Island ($175 million), Insightec ($150 million), Semperis ($125 million) and Weka ($100 million).

Other technology industries, notably automotive, IoT and food technology, “have not enjoyed similar success and most continue to suffer from a downward trend since the first half of 2022,” IVC and LeumiTech said.

And while logic would suggest a slowdown in startups, the researchers found that 81 companies have been founded so far in the first half of 2024, “but our estimate is 500 to 600 this year,” down slightly from the estimated 600 to 650 companies founded in 2023.

In terms of exits (M&A, buyouts and IPOs) by Israeli high-tech companies, the number has been declining since the second half of 2021 and shows some improvement in the first half of 2024, but remains well below the “normal” numbers from 2017 to 2020. “However, this change in course supports the perception of a recovery that we are seeing in other parts of the local industry.”

Among the standout M&A deals in the first half of the year: WalkMe was acquired by SAP for $1.5 billion, Resident by Ashley for $1 billion, and BioCatch by Permira for $750 million. In total, there were 17 M&A deals worth more than $100 million each from January to June 2024.

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