Israel's two main startup research surveys by Start-Up Nation Central (SNC) and IVC Research - Leumitech have shown the sharp downward trend in startup financing rounds in 2022, especially in the second half of the year.
SNC found that the total volume of investment in Israeli startups in 2022 plunged by almost 50% from a record $27 billion in 2021 to $15.5 billion in 2022. SNC said that this reflected a global trend with Silicon Valley based startups attracting 40% less investments in 2022 compared with 2021
SNC described 2022 as "A year that feels like two years: The first half-year of 2022 was a continuation of 2021’s upward trend, but the second half of the year was marked by a decline in financial markets and fears of a global recession."
SNC data shows that Israel's cybersecurity sector was hit hardest with a decline of 60% between 2021 and 2022 in the amount raised.
Start-Up Nation Central CEO, Avi Hasson said, "A multi-year perspective shows that 2021 and not 2022 was the exceptional year in the Israeli high tech industry. The unrealistic quantum leap in investments, market cap, and transaction multiples in 2021 corrected itself in 2022, and alongside global macroeconomic trends, there was a markedly significant decline in investments, particularly in the second half-year of 2022."
One bright spot was that seed investment in Israeli startups in 2022 increased by 22% compared to 2021, or from $1.3 to 1.6 billion.
SNC data showed 2022 that the most active domestically-based investors in Israel in 2022 were the OurCrowd and Viola venture capital funds, which invested in 84 and 47 startups, respectively, followed by Pitango, which invested in 21 startups. The leading foreign funds operating in Israel in 2022 were Insight Partners, funding 40 startups, and Tiger Global Management, invested in 26 startups last year.
IVC-Leumitech reported a 42% fall in financing rounds completed by Israeli startups last year from a record $25.9 billion in 2021 to about $15 billion in 2022. In particular IVC-Leumitech recorded a major slowdown in later stage funding from $21.8 billion in 2021 to $10.5 billion in 2022. Accordingly the number of new unicorns fell from 42 in 2021 to 23 last year, almost all of them in the first half of the year. The capital invested in Israeli unicorns fell from $2.3 billion in the first quarter of the year to just $500 million in the fourth quarter of 2022.
Instead investors flocked to earlier stage startups. 2022 was a record year for seed funding with $4.4 billion raised by Israeli startups compared with $3.9 billion in 2021.
Published by Globes, Israel business news - en.globes.co.il - on January 11, 2023.
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