Israeli tech companies raised $4.5 billion in the second quarter of 2022, down 31% from $6.6 billion in the corresponding quarter of 2021, according to a report by Israeli venture capital firm Greenfield Partners. The report also found a sharp fall in the number of financing rounds in the second quarter - 104 - compared with 132 in the first quarter of 2022 and 135 in the second quarter of 2021.
Despite the fall in second quarter financing rounds to $4.5 billion, the figure was still well above the $2.5 billion raised in the second quarter of 2020, which was a record year.
Greenfield Partners attributes much of the fall to the reluctance of unicorns, privately held tech companies worth more than $1 billion, to complete financing rounds because of their awareness that it would not be at a higher valuation than their previous financing round and possibly even at a lower valuation. During the second quarter, blockchain company Starkware was the only existing unicorn to announce a new financing round, while in the corresponding quarter of 2021, four existing unicorns announced new financing rounds - Gong ($7.2 billion valuation), Next Insurance ($4 billion), Forter ($3 billion), and Trax ($2.25 billion).
There were seven deals in the second quarter involving unicorns - Monte Carlo, Unit Finance, StarkWare, Optibus, Perimeter 81, Viz.ai and Vayyar compared with 14 in the second quarter of 2021.
Greenfield Partners managing partner Shay Grinfeld said, "The figures for the second quarter of 2022 reflect the continuing trend in the decline of the amount of investments in startups due to the macroeconomic environment and the falls on stock markets. The fall in the amount of the capital raised supports the development of alternative channels for raising money such as convertible notes or SAFE, or expanding investment rounds from internal investors. It can be assumed that in the future this period will bring other creative financial solutions due to the uncertainty on the markets. We see companies, which are working even harder in this period to ensure sufficient cash flow for 18-24 months and are working to raise additional resources."
The report also found a 50% decrease to 13 in the number of growth round deals in the second quarter of 2022, in which between $50-100 million was raised, compared with 26 in the corresponding quarter of 2022.
Greenfield Partners found that the leading sector for new startup investments in the second quarter of 2022 was digital health (24%), followed by cybersecurity (17.4%), AI and machine learning (12.8%), and cloud technology and development (10.7%). Other areas that attracted investments included B2B, fintech, cryptocurrencies, consumer products, deep tech, and transport.
Published by Globes, Israel business news - en.globes.co.il - on July 3, 2022.
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