January 27, 2023

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Investment in Israeli Tech Startups Fell by Nearly Half in 2022

2 min read

There was a downturn in the Israeli tech sector in 2022, as there was a decline in the funding of startups by almost half to a sum of $15.5 billion.

A non-profit organization named Start-Up Nation Central (SNC), which tracks the tech industry in Israel, published a report on Tuesday.

It showed that the biggest hit was delivered to cybersecurity firms, while local startups had seen their seed investment increase.

Fall in investments

The report showed that there was a 43% decline in the value of investments last year as opposed to 2021 during which Israeli firms had managed to generate private capital of a whopping $27 billion.

This had driven up the valuations of the deals. In the same time period, there was also a decline in the number of investment rounds conducted by one-third.

A total of 1,103 investment rounds were conducted in 2021, but this number dropped in 2022 to 826. Company valuations had been high in 2021 due to the massive flow of funds.

A similar flow of funds had also been seen in the starting months of 2022. These valuations were of companies that had not even been turning a profit.

But, the market had begun to turn halfway through 2022, which meant that shares and valuations fell.

The problems

This all happened because of the rise in inflation as well as interest rates due to the ongoing war between Russia and Ukraine, which affected the global economy and supply chains, forcing investors to hunker down.

Avi Hasson, the CEO of Start-Up Nation Central, said that 2022 seems to have been a combination of two years.

The first half of 2022 had the 2021 flavor, as the market was more bullish, while the second half showed a slowdown taking place.

The CEO said that 2021 had seem an unrealistic rise in market cap, investments as well as transaction multiples and 2022 proved to be the year of correction, along with global macroeconomic trends.

The downturn

Due to the downturn in the market, tech companies have laid off thousands of workers, which has resulted in funding pullbacks and publicly traded tech firms have seen their values decline sharply.

New offerings are dealing with a bear market and this indicates that the party is over and the economy has become gloomy.

Hasson stated that the tech market in the US had seen the highest number of layoffs. High tech saw about 100,000 people lose their jobs, but the numbers are not even remotely close to Israel.

He said that companies in Israel had laid off 5% to 10% of their staff and slowed down their growth, but this was more for optimization.

Dozens of employees have been laid off in the recent months by the largest tech employer in Israel’s private sector, Intel Israel.

Around 120 employees were also laid off by home seltzer-making machines maker, SodaStream. The largest credit card company in Israel, Isracard is also laying off 12% of its workforce, which is around 250 workers.

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