Israeli media reported on Friday that Israeli tech startups and companies experienced a 56% slump in fundraising this year compared to the same period in 2022.

According to preliminary annual data compiled by Israeli research center IVC and Leumitech, Israeli startups raised 2023 a total of $6.9 billion, a figure comparable to levels observed in 2018 and 2019.

However, the number of deals saw a significant 44% year-on-year decline, with only 392 funding transactions recorded throughout the year. This marks the lowest figure since at least 2015, as indicated by the data.

Complete annual data for the Israeli tech sector is anticipated to be disclosed in January.

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Tech sector in shambles

In 2022, the tech sector garnered over $15 billion in capital. The year prior marked a funding bonanza with a total of $25.6 billion in private investments, resulting in elevated company valuations.

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Nevertheless, in the latter half of 2022, investments in tech companies decelerated due to increasing interest rates, a global stock market downturn, and tech industry layoffs.

When the aggression on Gaza began on October 7, the Israeli occupation forces [IOF] initiated the call-up of approximately 350,000 reserve soldiers, including numerous founders, executives, and employees from the Israeli tech sector.

Israeli startups later witnessed a 15% decline in fundraising during the last quarter of the year, totaling $1.45 billion compared to the preceding quarter before the commencement of the war, as per the IVC-Leumitech report.

The number of deals also experienced a slowdown, with 75 transactions recorded in the last three months of the year, marking a 17% decline compared to the previous quarter.

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Israeli economy to shrink 2% as workforce is displaced, drafted

It was reported earlier this week that the Israeli economy is expected to shrink by 2 percent in the concluding economic quarter of the year. 

Since the mark of the war on Gaza, workers have been drafted to serve with the Israeli occupation forces, marking a drastic economic stump for "Israel". Before the war, only 3% of the workforce was missing from labor markets. The statistic saw a 17% jump following October 7, according to the Taub Center for Social Policy Studies, an Israeli think tank. 

Consequentially, 20% of the Israeli workforce, or 900,000 Israelis, are now either enlisted in the IOF, unemployed at home, fled from settlements where attacks have been concentrated, such as by the borders of Lebanon and Gaza, or are unable to work due to the destruction of their work industry. 

Although negative estimates of Israeli economic growth have been a concern for the occupation, accounting for the material losses it has experienced, as well as the drastic cost of war, the "Bank of Israel" projected an ambitious 2% growth, referencing previous wars and the Covid-19 epidemic that did not affect the economy as expected. However, different sources claimed that if the Israeli economy were to see growth, it would roof at 0.5%. 

“The wide range of projections that we are seeing comes from some of the different assumptions about how long and how intense the fighting will be,” said the vice president of research at the "Israel Democracy Institute" and a former governor of the "Bank of Israel," Karnit Flug.