Next47’s report shows Israel’s tech sector resilience

Even without the ongoing war and other regional conflicts, the past year was relatively tough for Israel’s hi-tech sector. However, it wasn’t a problem solely plaguing Israel-based companies, as 2023 as a whole saw the tech sector contract—with layoffs after layoffs reported at companies of all levels worldwide.

That being said, global trends can often feel extra concentrated within Israel, especially for a sector typically seen as a constant bright spot in the country’s economy and culture. So on top of an already tumultuous period, it may have seemed as though the hi-tech sector stumbled more than most.

But that’s not necessarily the case.

While many saw 2023 as a “lost year” for the tech industry’s growth, the reality is that the sector has remained remarkably resilient throughout the obstacles it faced throughout the year. Of course, the year brought unprecedented challenges that no one could have predicted. Likewise, potential growth in 2023’s critical fourth quarter was undeniably stalled due to the aftermath of October 7, as companies within Israel had to readjust their priorities and operational capacity.

But where one sees an obstacle, another sees an opportunity—which is exactly what happened with many tech companies across the country.

Now nearly halfway through 2024, the tides are turning towards a more optimistic narrative for Israel’s tech sector. And one VC fund with an extensive portfolio of successful projects in Israel has done the research to back up the numbers on this positive outlook.

In a recent report, Next47 has provided an extensively researched outline detailing the Israeli tech ecosystem’s ongoing growth and resilience. Specifically focusing on the startups and scaleups that continue to fuel Israel’s status as an innovation leader, Next47 Partner Moshe Zilberstein takes a VC perspective to highlight the sector’s exemplary milestones over the past year.

Mergers, acquisitions contribute to Israeli tech companies

Mergers and acquisitions in general seemed to greatly contribute to Israeli tech companies continuing to thrive—Next47 reported 90 transactions for a total of more than $14 billion—with business operations across the tech sector generating hundreds of millions in revenue. Likewise, the report details numerous nine-figure exits for Israeli startups, a majority of which have only been operating for under five years.

The tech ecosystem constantly ebbs and flows regarding what sector or growth mechanism gets its turn in the spotlight. For instance, while AI is still a leading sector constantly garnering attention and backing from VC funds and angel investors, there’s been a notable shift towards data security and enterprise-focused startups.

Next47’s report also highlights this trend shift in recent monumental funding rounds. A string of nine-figure funding rounds has seen hundreds of millions in capital influxes going to Israeli startups in these niches. The standouts here, of course, are Wiz and VAST Data reaching $12 and $9.1 billion valuations, respectively. With VAST Data being part of Next47’s portfolio, the VC’s continued support of enterprise-centered startups characterizes its ongoing investment activities in Israel.

This kind of birds-eye analysis, which only a VC with a long-standing relationship with Israel like Next47 can provide, elucidates how the tech sector is constantly shifting in priorities and strategies to weather difficult circumstances. It also helps paint a more grounded picture of the realities of startup life and directional shifts that could dictate the future of tech innovation within Israel. Keeping an ear to the ground is always essential when looking towards the future.

Of course, the sun cannot always shine on every single startup or niche within the tech industry, but such reports exemplify what Israel’s tech sector does best and show emerging trends influencing innovation beyond its borders.

Likewise, the report ends with Next47 highlighting that many Israeli companies have now “graduated” out of the startup stage, now stepping into the position of being leaders and acquirers themselves as opposed to waiting for a buyout. With rumblings of an IPO boom, we may soon be witnessing more Israeli companies going public and further cementing themselves as tech-sector cornerstones.

While it’s naive to pretend that the Israeli tech sector hasn’t faced its share of challenges over the past twelve months, especially since October 2023, it’s also worth noting how tech leaders have been able to regain their momentum. As VCs like Next47 and others continue to uplift innovative projects in Israel, the country’s tech story will continue on to a prosperous next chapter.