By Steven Scheer
JERUSALEM (Reuters) – Israeli high tech firms raised $1.5 billion in the fourth quarter of 2023, preliminary data showed on Thursday, in a sign that foreigners are still investing in Israeli startups despite Israel’s war with Palestinian militant group Hamas.
The Israel Venture Capital (IVC) Research Center and LeumiTech said fundraising in quarter up until Dec. 26 dipped 15% from the third quarter but 75 deals were done. The war began on Oct. 7.
Early stage “seed” funding was $220 million in 31 rounds.
The report said that foreign participation rose in the fourth quarter after a decline earlier in 2023, saying “the presence of foreign investors is a significant indication of the availability of funds for investments.”
Last week, a group of 70 U.S. tech executives came to Israel in a show of support.
LeumiTech CEO Mia Eisen-Tzafrir said the fourth quarter data, were “an indication of the high durability of the Israeli high-tech industry and an important reminder of the role this sector in the Israeli economy has especially these days”.
High-tech accounts for 12% of employment, more than half of Israel’s exports, 25% of income taxes and nearly a fifth of its overall economic output.
At least 15% of the tech workforce has been called up for military reserve duty.
Overall, Israeli startups raised about $7 billion in 2023 versus close to $16 billion in 2022 – mainly in the first half of the year before the global economy began to slow.
In addition to a drop in funding due to the economy, foreign investors were spooked by Israel’s plan to overhaul its judicial system, a proposal that has since been shelved.
Eisen-Tzafrir said that 2023 reflected a return to the levels of investment and volumes of activity from 2018 and 2019 – before the peak years of relative anomalies in 2020 to 2022. Tech fundraising in Israeli startups reached $26 billion in 2021 in 779 rounds.
IVC CEO Ben Klein said 2023 was challenging for the Israeli economy and high-tech.
“The results of the entire year, especially the fourth quarter, support an optimistic approach towards the local industry,” he said. “Despite the complexity, foreign investors’ participation level is a clear sign of the attractiveness of Israeli high-tech companies, even in difficult times”.
(Reporting by Steven Scheer; Editing by Angus MacSwan)
