Israel has emerged as a beacon of technological innovation and economic resilience, showcasing its high-tech sector’s capacity to flourish amidst global challenges. Clearly, there is considerable appetite for Israel, with nearly $5b in disclosed transaction value of 30+ M&As since October 7, 2023, including Palo Alto Networks’ acquisition of Talon Cyber Security and Dig Security for an aggregate of ~$1b, as well as Nvidia’s recent acquisition announcements of Run.AI and Deci for an additional $1b.
Over $3.5b has been channeled into Israeli startups in recent months in nearly 100 private capital raises. Yet, despite the influx of billions of dollars in investments, a closer examination reveals the average deal size is $19m, indicating a concentration of funds in growth-stage companies. Seed-stage ventures, vital for a sustained economic pipeline, received only 15% of overall funding.
This trend is underscored by the decline in the number of new startups. In 2021, 1,400 new companies were founded in Israel, but since then we have seen a significant decline to merely 400 in 2023, and an even lower trajectory for the current year. This trajectory is not just a statistic; it’s a harbinger of a potential economic shortfall a decade from now. Startups conceived today are the lifeblood of future exits, tax revenues, and significant job creation. On average, for every 100 startups, one usually evolves into a ‘mega unicorn,’ a single entity capable of generating ~3,000 jobs. With the current reduction, we are staring at a future deficit of approximately 30,000 jobs and a corresponding dip in tax revenues, of which the high-tech sector contributes ~30% of Israel’s overall taxes, and more if you include indirect taxes.
Yet, the early-stage investment gap in Israel is not merely a challenge; it is also a unique opportunity for discerning investors. With valuations at half of those in Silicon Valley (on average $7m vs. $14m) and competition far less fierce, the current landscape offers fertile ground into a market known for its relentless drive and innovation. This, coupled with a high-tech sector focused on global markets, means a tech ecosystem far less sensitive to local factors. Currently, at iAngels, we are reviewing 30+ deals a week, and the overall lack of competition in comparison to several years ago is striking. But this challenging fundraising environment also leads to more resilient companies. Entrepreneurs have returned to being “scrappy,” with a deeper appreciation for funds, and increased bootstrapping capabilities as they need every dollar to take them farther.
As investors seek landscapes with potential for high returns, Israel’s early-stage ecosystem stands out as a market that, while tested by adversity, remains backed by a resilient, innovative, and committed workforce. The country has consistently demonstrated an ability to adapt and leverage challenges into opportunities for growth. We witnessed this commitment recently, with 300+ missiles launched by Iran towards Israel, where despite a sleepless and terrifying night, much of the country, including us, reported to work the following day.
Today more than ever, the country needs us to contribute economically, socially, and to the security of Israel. Since the onset of the war, iAngels has divided its time between our work, where we are focused on investing and connecting the world to strong Israeli tech companies and entrepreneurs, reporting to reserve duty where more than 20% of our team served or is serving, and a variety of philanthropic activities to unite society, improve civil advocacy and empower economic inclusion.
iAngels has invested in 13 companies since October, including 4 up rounds, 2 down rounds, and 4 new companies, who have collectively raised upwards of $80m. For many, this was no small feat, including Guardz, who successfully closed a $19m Series A, all while Co-Founder Alon Lavi reported in from combat reserve duty. We’ve also witnessed two portfolio companies successfully raise funds from investors in the UAE, a pleasant surprise and reflection of regional collaboration, as well as the announcement of our exit in BioCatch, which is being acquired by Permira for $1.3B. While of course some companies in our portfolio are struggling more, and there is no doubt that some companies will fail, as is always the case in venture capital, despite a chaotic four years, including Covid-19, a valuation reset, and a war, our Ventures Fund has yet to witness a company closure, which is a good demonstration of entrepreneurial resilience.
The call to invest in Israel now is more than an economic proposition; it’s a partnership with a nation renowned for turning challenges into triumphs. Israel’s robust R&D infrastructure, the presence of high-tech unicorns, and a skilled pool of entrepreneurs and engineers are all part of a proven ecosystem that has consistently punched above its weight on the global stage. The recent downturn in early-stage investments is a temporary shift that savvy investors can capitalize on, all the while ensuring that Israel remains a startup nation that continues to scale up and that the next decade of Israeli innovation is as vibrant and impactful as the last.
iAngels
Founded in 2014 by Shelly Hod Moyal and Mor Assia, iAngels is a women-led venture capital firm in Tel Aviv, Israel. Combining a deep, proprietary-research process and a uniquely curated portfolio, iAngels is committed to helping build and scale great tech companies, and has a proven ability to generate substantial return. iAngels believes in going beyond and backs those who do, partnering with some of the highest caliber entrepreneurs in the nation. With over $400m AUM and 26 profitable exits and secondary events, iAngels is one of the most active and recognized investors in the Israeli tech ecosystem.
