Investment in Israel’s startups fell by over 40 percent during 2022.
The cyber sector suffered the most serious decline, down 60 percent in 2021, with only agri-food managing to remain stable, according to the non-profit Start-Up Nation Central.
It was a year of two halves, with sustained growth during the first six months followed by a sharp decline as the world was gripped by financial crisis.
Total investment for 2022 was $15.5 billion, down 42 percent on a record $27 billion in 2021.
Avi Hasson, CEO at Start-Up Nation Central, said 2021 was the exceptional year, with an “unrealistic quantum leap in investments”, rather than 2022.
Last year’s performance was partly a correction to those high levels of investment, and partly the result of global macroeconomic trends, which hit Silicon Valley in the same way.
“The current crisis underscores the need to create variety in the technology sectors that lead the Israeli high-tech industry,” he said, “and to develop sturdy economic ‘legs’ together with additional sectors that can produce significant economic and technological value for Israel and the world.”
He cautioned that the downward tend in venture capital funding could continue into 2024 and 2025.
Foreign investors have largely been switching to “seed rounds” – sinking smaller sums into early-stage startups, rather than bigger sums into more mature companies.
“Seed investment in Israeli startups in 2022 increased by 22 percent compared to 2021, or from $1.3 billion to $1.6 billion,” said Hasson.
“These figures are especially surprising when we take into account the decrease in the number of startups that would presumably have led to a decline in the total value of seed round investment.”
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