It is very clear to all those involved in the Israeli startup ecosystem that 2022 has not and is not replicative of 2021, especially when it comes to capital raised. A new summary report by IVC and Lumitech revealed that total money raised by Israeli startups since the beginning of the year stands at $12.3 billion, which is a 30% decrease compared to last year. Despite this negative figure, it is still a higher amount than the capital raised in 2020 – and more than any previous year before it.
However, if we analyze the third quarter only – the picture is less positive. The Israeli startups raised $1.375 billion in this quarter, which is a 57% decrease in the amount raised compared to the same quarter last year, which saw $3.145 billion raised.
What can we expect next? According to the report, in the last quarter of this year, capital raising is expected to reach $1.25 to $1.5 billion – which is a figure we have not seen in the Israeli ecosystem since 2019.
One of the reasons for the bleak situation we find ourselves in regarding capital raised is the significant decrease in the number of unicorns and how much they raise, which has become a rare creature yet again. In the last quarter, the unicorns raised only $467 million, less than 20% of the amount they raised in the corresponding quarter in 2021 ($2.483 billion). Mega funding rounds of $100 million or more also fell, and we only saw a total of 3 such rounds in the entire quarter for a total of $512 billion. This is also a significant decrease – 53% compared to the same quarter last year.
Even if we look at exits, the picture isn’t great; since the beginning of the year, transactions totalling $7.4 billion have been made (minus the giant purchase of Tower by Intel, which has not yet been finalized). The IVC states that they have identified 100 acquisition transactions of Israeli startups since the beginning of the year, a decrease of almost 50% in the total number of transactions compared to 196 carried out in the first three quarters of 2021.
Not everything is as bad as it seems
When comparing all the data, it is important to note that the investments in young companies – those in the pre-seed, seed, and Series A stages – remain positive. The startups in these stages raised $880 million in the third quarter of 2022, which is only slightly lower than last year when comparing the same quarter. According to IVC, alongside these figures, you can also see a continuous increase in the median investment in the seed rounds of Israeli startups.