Investments in Israeli tech firms decline by 65%: Report

By Al Mayadeen English
Source: Israeli media
2 Jul 2023 14:53
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The deterioration in the Israeli stock market was mainly caused by the judicial reform plan initiated by Neyanyau's government.

Israeli settlers protest against the government's proposed judicial reform plan in "Tel Aviv", January 31, 2023 (Israeli media)

A recent report by IVC Research Center and LeumiTech (a subsidiary of Bank Leumi that specializes in banking for tech companies) shows that the investments received by Israeli startups and tech firms have decreased by 65% in the second quarter of this year compared to the same time last year, according to the Israeli newspaper Times of Israel.

From April to June (the second quarter of 2023), Israeli tech companies garnered a total of $1.78 billion worth of investments, which marked a slight increase in investment from the first quarter of the year (January to March) when it had totaled $1.7 billion. However, compared to the investments of the second quarter of last year (April to June 2022), investment has decreased by a total of $5 billion, according to the IVC-LeumiTech Review of Israeli Technology.

In 2021 and 2022, about 80 percent of investments in the tech sector were raised through foreign direct investment, according to the Israel Innovation Authority.

Israeli tech firms garnered a total of $15 billion last year. In 2021, during the investment boom, investments reached $25.6 billion which caused an increase in the price of assets of Israeli tech. However, investments deteriorated in the second half of 2022 amid rising interest rates, a global stock market slump, and technology sector layoffs.

Most notable among the causes which caused the decline in investments was Netanyahu's judicial reform bill which caused investors to be cautious about investing their money when it was unclear how the situation will play out, the Israeli newspaper explains.

Investors have become harder to attract in a tense market that was exacerbated by political uncertainty. The decline in investments has caused Israeli firms to spread out their budget too thin to ensure sustainability.

The deterioration in the Israeli stock market was mainly caused by the judicial reform plan initiated by Neyanyau's government, the newspaper explains.

In the first half of 2023, the TA-35 and TA-90 stock indices fell by about 13%. However, the MSCI World Index jumped 12% during the same period, indicating probable signs of recovery in global markets.

Although investments continued to decline in the second quarter of 2023, the data in the IVC-LeumiTech report showed that the decreased rate of decline in investment versus the first quarter has paused at least for the time being.

“We continue to see a decrease in the annual level of funding rounds, both in terms of amounts and in the number of companies. At the same time, we see the first signs of stabilization in the capital-raising numbers thanks to follow-on investments, compared to stopping the initial investments,” LeumiTech CEO Timur Arbel-Sadaras says.

"It will be interesting to see how the coming months will pass, and how companies will adapt their financing rounds to the current economic climate, which will enable new deals and acquisitions in the technology sector," said Arbel-Sadras.