A painful picture: SNPI's analysis shows that total investments in Israeli high-tech stood at $7.3 billion this year, a drop of about 60% compared to 2022 – twice the rate of decline in investments in the US.
Of all the foreign funds that invested in Israeli high-tech in 2022, 42% did not return to invest in 2023.
The global recession and local instability, culminating in an iron sword war, have made 2023 a year of crisis in Israeli high-tech.
The SNPI Research and Policy Institute published a report for the end of the year, indicating a continued decline in investments and in the number of financing rounds, mainly in the early stages of funding, a significant jump in the share of foreign funds that stopped investing in local high-tech, and sharp declines compared to the US and Europe.
Nvidia Building and Yokneam's Industrial and Hi-Tech Park, Photo: Shutterstock
After a particularly difficult year, 2024 presents Israeli high-tech at a crossroads that will shape its future. The report presents four main questions that will determine whether high-tech will continue to be the growth engine of the Israeli economy, combined with reasons for optimism and points of concern.
Low in funding rounds
The report also shows that 2023 saw a low in the number of funding rounds, which amounted to 624 rounds, a 40 per cent decline compared to 2022.
Investments in the fourth quarter of this year totaled $1.3 billion, the lowest figure since 2017. The authors of the report also note that the rate of decline in investments in Israel in 2023 compared to last year is double that in the US – a drop of about 60% in investments in Israeli high-tech, compared to 30% in the US and 44% in Europe.
The data is alarming, photo: none
There has also been a sharp decline in investments in early rounds and total seed investments (i.e., the first "serious" investment in the startup's life) have dropped by 50% compared to 2022.
Moreover, 42 per cent of foreign funds that invested in Israel in 2022 did not return to invest in 2023 – more than double the previous years' average of about 17 per cent. This phenomenon is also evident among Israeli funds, but at a lower rate of 32% (compared to an average of 19%).
Great distress
Prof. Eugene Kandel, Chairman of SNPI, said, "Israeli high-tech is in distress after a particularly difficult year, with a global slowdown, legal reform and the war that has not yet ended. Israel does not have the privilege of relying only on market forces and risking the decline of the engine of the economy – and subsequently of the entire Israeli economy."
A high-tech worker works on a computer, photo: GettyImages
Kendall called on the government to develop and implement a clear, long-term strategy to help the tech industry recover. "As in past crises, we must ensure that high-tech recovers and even emerges stronger from the current crisis, and returns to a global leadership position. Today, more than ever, there is a need for smart, coherent and proactive government policies.
"We call on decision makers not to ignore the bright warning lights and to act immediately to establish a government-wide task force, in cooperation with the high-tech sector and civil society, to develop and implement a clear and long-term strategy. Without a joint effort, Israel could find itself deteriorating to a point of no return."
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