Israeli startups raised $1.6 billion in the first quarter, up 10% from previous quarter

Leumitech, Bank Leumi's high-tech banking arm, and IVC, a provider of data, quantitative research, and business information, have published the first data from the Tech Review report for the first quarter of 2024. According to the preliminary data in the report,  Israeli high-tech started the year positively, with a higher volume of fundraising and a higher number of rounds than in previous quarters.

According to preliminary findings, as of March 27, 2024, capital raised in the first quarter totaled $1.6 billion in 105 rounds. The volume of capital raised is 10 percent higher than in the previous quarter (Q4/2023) and 10 percent lower than the volume of capital raised in the corresponding quarter of last year. The number of funding rounds rose to 105, breaking a consecutive decline since the beginning of 2022.

Leumitech CEO Maya Eisen-Zafrir: "In light of the domestic instability brought on by the ongoing fighting and complex macroeconomic conditions, we see that the trend of stabilization in the industry continues into 2024. Israeli high-tech is standing firm and showing encouraging signs of recovery. We are pleased to see the growth in the number of transactions among young companies, which represents a significant vote of confidence by investors in Israeli entrepreneurs. The cyber sector continues to dominate, with significant transactions made in the quarter." Eisen-Zafrir added, "Looking ahead, assuming that geopolitical or macroeconomic extreme scenarios do not materialize, we hope that we will see continued recovery in the next quarter as well."

The increase in the volume raised in the quarter was supported by six investments of more than $100 million each, which attracted $752 million in the quarter (about 47%). The cyber sector was particularly prominent with total fundraising totaling $620 million, 38% of the total capital raised.

The number of seed rounds (seed rounds+A) climbed significantly for the first time in the first quarter of the year, compared with the continuing downward trend since the beginning of 2022. The volume and amount of investment in early rounds are an indication of investors' confidence in new companies and their ability to develop. The total number of early rounds in the first quarter was 77 percent, significantly higher than the average of these rounds out of total fundraising.

Continuing the trend in the previous quarter, the ongoing fighting did not alienate foreign investors, and their involvement in transactions increased compared to the previous quarter. The downward trend in the volume of participation of domestic investors also broke in the quarter — for the first time since the beginning of 2022 — and the number of investments made returned to increase.

"After three consecutive quarters in which there were declines in the volume and number of capital raised by Israeli technology companies, the data for the first quarter of 2024 are pleasantly surprising," said Ben Klein, CEO of IVC: "Despite the economic and political vulnerability, the analysis of the data indicates stabilization and improvement, albeit modest, in most financial parameters of Israeli high-tech. In addition, the substantial increase in the number of deals in early capital raising rounds (Seed, A Rounds) indicates positive sentiment among investors, and it can be hoped that they indicate a change in trend."