Private funding falls by nearly half for Israeli startups, report says

Annual funding for the Israeli tech industry is expected to have fallen by nearly half in 2023 after a planned judicial reform and war with Hamas in Gaza deterred many investors, an annual report by Startup Nation Central found.But the group that coordinates global organisations with Israel‘s innovators said the figures showed investor appetite was still robust and it was cautiously optimistic for the coming year.

“We hope the ecosystem’s bedrock of innovation, global partnership, and proven resilience will steer it through uncertainty toward a continued growth trajectory,” Start-Up Nation Central CEO Avi Hasson said in a statement.

Once undisclosed rounds have been included, private funding for Israeli tech is expected to have hit nearly $10 billion in 2023, back down to prepandemic levels and down from the nearly $19 billion it received in 2022, the report published on Monday said.

The high-tech sector drives Israel’s economy and accounts for 12% of employment, more than half of Israel’s exports, 25% of income taxes and nearly a fifth of its overall economic output.

Aside from a global slowdown, foreign investment declined last year because of an Israeli government plan to overhaul the judicial system, which sparked months of nationwide protests and concern over the country’s democratic principles among Western allies.

Israel’s Supreme Court has since struck down the law, but the Israel-Hamas conflict has also required a mass call up of workers for military reserve duty. The report found that for 2024, 88% of multi-national corporations plan to either sustain or grow their presence in Israel.

It added however that there was a split in investor sentiment, with 52% predicting a downturn in investments for 2024.