Bank IVC: Israeli high-tech companies raised $1.78 billion in the second quarter of 2023

The Israeli high-tech industry suffers from two pincer movements that work against it. On the one hand, the high and rising interest rates in the world (and in Israel) cause venture capital investors to divert more money to channels with lower risk than hi-tech, and at the same time the legal revolution causes international investors to prefer investments outside of Israel and if they really want Israeli companies, they take them out of here.
Bank Leumi maintains an interesting banking and financial activity in the world of tech under the arm "Leomitech" which from time to time conducts a comprehensive survey with the research company IVC with the aim of examining the development of this important industry and hence making appropriate banking decisions.
Leumitech and IVC survey data show that Israeli high-tech companies raised $1.78 billion in the second quarter of 2023 in 100 deals. The total volume of the amount of recruitment shows a drop of 65% compared to the total volume recorded in the second quarter of 2022, alongside a 48% decrease in the number of transactions compared to the corresponding quarter last year.
In a quarterly comparison, the amount of funding in the second quarter of 2023 reflects a slight increase of 2% compared to the first quarter of 2022. In addition, this is the first time that the downward trend in the presence of foreign investors in investments in Israeli hi-tech companies has been broken after six consecutive quarters.
CEO of Leumitech, Timur Arbel-Sedars: "We continue to see a decrease in the annual level of recruitment rounds, both in terms of amounts and in the number of companies recruiting. At the same time, we recognize the first signs of a stabilization in the rate of recruitment thanks to FOLLOW-ON investments compared to a stoppage of initial investments. It will be interesting to see how the coming months will develop. It will also be interesting to see how the companies will adjust the recruitment rounds according to the spirit of the times and the new economic environment we are in so that new transactions and purchases in the market will be possible."
Over the last few quarters, you can see the huge deals (over $100 million each) becoming rare and statistically exceptional. When you exclude these deals from the analysis of the numbers of the last quarters - the exclusion of the deals over $200 million (in the second quarter there is only one deal One relevant one: a $200 million investment in Upstream Bio.) It is evident that the downward trend in the volume of hiring has been slightly halted, this after a decline that has continued since the 4th quarter of 2021.
At Leumi Tech they also say that another change is evident not only in the amounts invested, but also in the characteristics of the liquidity providers to the companies. In the analysis of the geographical location of the investors, IVC identified a change in the level of involvement of the foreign investors. The attached chart shows a stabilization in the number of investments made by foreign investors active in the Israeli market. This is actually the first time that the downward trend in the presence of foreign investors has been broken after six consecutive quarters.