Employees in the high-tech industry (illustration). Returning to your life after a long period of despondency?/ShutterStock
Buds of stabilization, cautious optimism and more - everyone is welcome to choose the term that suits him, but one thing is indisputable: the high-tech sector in Israel, which has suffered from a prolonged decline, is showing signs of slumping in activity and attracting more investments, according to preliminary data from the Leumitech and IVC report of the third quarter in Israeli high-tech:
• Israeli high-tech companies raised $1.676 billion in the third quarter of 2023 in 85 deals
• The volume raised in the third quarter reflects a decline of 14 percent from the last quarter, but stability is evident compared to the first quarter of the year
. The volume of foreign investors also stabilized compared to recent
quarters The stabilization in capital raising by Israeli high-tech companies continues: Israeli high-tech companies raised $1.676 billion in the third quarter of 2023 in 85 deals. The amount raised reflects a decline of 38% during the year compared to the amount raised in Q3/2022, and a decline of 41% in the number of transactions compared to the corresponding quarter last year.
However, on a quarterly basis, the volume of capital raised in the third quarter reflects a decline of only 14 percent compared to the second quarter of the year, and almost unchanged from the first quarter.
The data provide the first glimpse into investment activity in Israeli high-tech in the current quarter. The full results will be published in the full report, Israeli Tech Review for Q3/2023, which is expected to be released in mid-October.
Increase in external and domestic recruitment/image processing, Shutterstock
Notable data from the report
If we exclude the huge deals (over $200 million) that have recently become rare, from an analysis of recent quarters (in the third quarter there is only one relevant deal: a $238 million investment in Cato Networks), the change in trend can be seen more clearly – from decline to stabilization. The third quarter is higher than the figures for the first quarter, and according to IVC's assessment, the final data for the quarter will reflect a volume of investments close to that which we saw in the second quarter.
Presence of foreign investors in the quarter
The presence of foreign investors, which is reflected in the number of transactions carried out, is usually a significant sign of the availability of money for investment, which declined slightly compared to the second quarter. However, the figure for the third quarter for the volume of transactions carried out by foreign investors also supports the continued trend of stabilization.
Seed rounds rise after 5 consecutive quarters decline A positive trend can also be seen in seed rounds, which attest to investors' sentiment to take risks in startups
, and to the ability of new companies to develop. The volume of capital raised in these rounds increased for the first time in the third quarter, after 5 quarters of continuous decline. Although the number of rounds is slightly lower than in the second quarter, IVC's assessment is that the numbers at the end of the quarter will indicate a change in trend in the number of companies that raised funds as well.
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Leumitech CEO, Maya Eisen-Zafrir/Nina Wurtzel
Leumitech CEO Maya Eisen-Zafrir said, "We continue to see third quarter data as the first signs of stabilization in the amount and volume of fundraising, data that bring us back to 2018-19 levels. Although there is still a decline in early rounds, it is more moderate than what we saw in previous quarters.
In addition, we see stabilization in the pace of follow-on investments, an indication that companies are beginning to adjust their valuations to the new interest rate environment."
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