The Israeli high-tech sector has managed to raise $3.1 billion since the October 7 Hamas attack and subsequent war, according to a recent report by Startup Nation Central, underscoring the industry's resilience despite facing significant challenges.
Approximately 15% of the sector's workforce has been called up for IDF reserves duty, and the air blockade on Israel has made business travel challenging. However, the report notes that investment trends in the Israeli high-tech sector over the past six months align with those observed in the United States, indicating resilience amid adversity.
Startup Nation Central reports that since October 7, there have been 220 private investment rounds announced, totaling an impressive $3.1 billion raised. The average investment size stands at $19 million, although this figure is influenced by several significant fundraisings completed before the onset of the conflict. Notable examples include a $265 million round for Next Insurance, backed by foreign venture capital funds, and a $118 million fundraising by VAST Data, valued at $9 billion.
During the past six months, there have been a total of 12 funding rounds exceeding $50 million each. The cybersecurity sector emerged as the frontrunner, attracting $1.1 billion in investment, indicating resilience despite the challenges posed by the war. Additionally, fintech and corporate software also saw substantial fundraising, collectively securing half a billion dollars.
The mergers and acquisitions market witnessed heightened activity, particularly driven by consolidation within the cybersecurity sector since last summer. Israeli cybersecurity firms benefited significantly, with transactions amounting to $3.7 billion. However, the most notable exit, reaching a billion-dollar valuation, stemmed from an unexpected source: the sale of mattress marketer Resident to Ashley Home in early March.
The sale of cyber startup Talon for $625 million to Palo Alto Networks marked the second-largest exit during the period. Other notable cybersecurity acquisitions included Dig Security, Avalor, Gem, Flow Security, and Spera Security, each acquired for substantial amounts ranging from $130 million to $350 million. A total of nine companies were sold for over $100 million since the onset of the war. While these transactions showcase short-term successes, they raise concerns about Israel's reliance on developing technology only to sell it at an early stage to larger entities, rather than nurturing major homegrown companies in the long term.
Despite the majority of investments and acquisitions being led by foreign entities, Startup Nation Central's data reveals a surge in the establishment of over 20 new venture capital funds in Israel, raising a collective $1.7 billion. Noteworthy fundraisings include Team8's $500 million raise and two Red Dot Capital funds securing $250 million. Notably, eleven of these new funds are emergency funds designed to aid startups affected by the conflict, such as the Google Support Fund, Iron Nation Fund, and 1948 Ventures.
The SNC report indicates a stabilization in the rate of investment in startups at approximately half a billion dollars per month since the war began. Additionally, mergers and acquisitions peaked at $2.6 billion in March, suggesting a trend likely to intensify as many companies face financial challenges in the months ahead. However, the missing element in the Israeli high-tech landscape remains public funding, with no IPOs anticipated soon and the IPO market not expected to fully open until early 2025.