Investment in Israeli privately-held tech companies slowed to just $1.7 billion in the first quarter of 2023, Start-Up Nation Policy Institute (SPNI) reports. This is the lowest quarterly figure for startup fund raising since the third quarter of 2018. In the first quarter of 2022, Israeli startups, growth companies and unicorns raised $6.7 billion after raising more than $6 billion in the first quarter of 2021.
This is an especially low figure when taking into account that 40% of the $1.7 billion was raised by three companies - Wiz, Via and eToro. Moreover, eToro's $250 million financing round was only technically completed last month but was actually raised two years ago through commitments prior to the company's SPAC merger, which was canceled. Only 112 companies raised capital in the first quarter of 2023, the lowest number since 2014. In the first quarter of 2022, 307 companies raised capital.
If the first quarter rate is continued throughout the year, privately held tech companies will raise $6.8 billion this year, down 60% from last year and down 75% from 2021.
The impact of the planned judicial overhaul
Undoubtedly, behind the plunge in the figures is the global economic crisis - high interest rates and inflation - and the specific crisis in the world tech sector. High interest rates have led huge investors, such as hedge funds and private equity, to divert their investments from loss-making tech companies to higher-yielding assets. In the meantime, the value of publicly traded tech companies fell sharply, and the large tech investment funds and venture capital funds have suffered a huge write-downs in valuations, making it difficult for them to raise capital for additional investments.
SNPI claims that there has also been an impact from the government's planned judicial overhaul, which although it cannot be measured, both investors and entrepreneurs have claimed contributed to the decrease.
SNPI made a comparison between the scope of hiring in Silicon Valley and in London. The comparison shows that while investments in Silicon Valley actually increased slightly in the first quarter, in Israel and London they recorded a decrease.
SNPI explains the joint decline for Israel and the UK by saying that in periods of high uncertainty there is a tendency for capital to flow from the rest of the world to the US, Globes reports.
