Israeli high-tech companies raised $9.8 billion in 395 deals in the first half of 2022, indicating that specific part of Israel's tech economy are showing signs of a slowdown, the IVC Israeli Tech Review H1/2022 report, released Wednesday, reveals.
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Overall, with $9.8 billion raised in 395 deals, Israeli start-up investment activity in H1/2022 was highly successful in historic ranges. However, the current trend shows a decline of 30% compared to the second half of 2021, after a continuous uptrend since 2016, the report indicates.
Capital inflow from mega-deals (over $100 million each) in Q2/2022 dropped nearly 70% from the top numbers of Q4/2021, and was responsible for most of the decline we saw in deal amounts from H2/2021 to H1/2022.
Early rounds financial activity performed very well in H1/2022. The median investment in early round deals increased to $5.6 million, signaling a possible change in investors interest to more potentially lucrative investments in early-stage companies rather than the overvalued Hyper Growth companies.
In H1/2022, 66 exits were completed, with just nine IPOs (including two SPACs) and 56 M&As.
The IVC estimates that 458 companies have been established thus far in 2022.
CEO of IVC Guy Holzman explained that the first six months of 2022 found "Israeli tech at an inflection point between overhyped valuations and the high possibility of global economic depression.
"With that in mind, the Israeli tech economy did extremely well during the last quarter. The numbers and amounts of deals didn't change much in historic levels, and the contracted valuations of high growth companies were well adjusted to the trend on Wall St. It still remains to be seen how the current situation will affect the early stage start-ups in the following months," Holzman added.
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Timor Arbel-Sadras, CEO of LeumiTech, said, "In recent months we have witnessed processes that will eventually lead to healthy economic conduct of the high-tech industry, in respect of multipliers and the focus of companies on growth, alongside operational efficiency and formulating an established business model. Mature companies that will act in accordance with these principles, will overcome the challenges and run successful funding rounds."
Early funding – pre-seed, seed, and A series – rose in H1/2022. The numbers and amounts of Pre-Seed, Seed and A rounds, which haven't come down – at least for the moment – support a positive outlook for the Israeli tech in the coming months and years. The median investment in the early rounds inched higher in the last two quarters.
The first half of 2022 also saw 20 new unicorns (start-up companies with valuations of $1 billion or over) The number of new members in the herd continued the downtrend from 2021, with amounts and number of funding rounds dropping steeply from 2021 levels.
High-tech exits in H1/2022 accounted for a total of $10.28 billion in 66 deals. Excluding one acquisition mega-deal of Tower Semi by Intel for $5.8 billion, the total amounts reached $4.48 billion. IPO and SPACs activity decreased significantly to just nine deals during the first half of 2022.
