A month ago, the Israel Innovation Authority published a report on the state of the tech ecosystem (also shared here on VC Cafe) highlighting just how crucial tech is for the Israeli economy. While the Israeli tech ecosystem only employs approximately 400,000 people, it’s responsible for over 40% of the GDP growth in the last 5 years, and represents 53% of the country’s exports. The war against Hamas (and attacks from Iran’s proxies in the north and the south of the country) put this engine of the economy at risk. But now, a new report by Startup Nation Central on the state of the Israeli tech in the first half of 2024 shows that Israel’s tech ecosystem demonstrated remarkable resilience in the first half of 2024, with significant growth in funding and M&A activity.
Highlights from the H1 2024 report
According to the report there are 7,158 active startups and 217 active investors in Israel’s innovative tech scene.
Private Funding recovered – Private funding surged by 31% compared to H2 2023, reaching $5.1 billion across 322 rounds. This growth outpaced other major tech hubs, including the US, Europe, and Asia. The increase was primarily driven by mega-rounds (over $100 million), which accounted for 56% of total funding. It’s worth mentioning that many companies choose the timing of announcing their rounds and the actual numbers might be significantly higher (estimated at $6.7 billion, a 42% increase compared to the equivalent period last year)
Cybersecurity Dominance – Cybersecurity emerged as the standout sector, representing a staggering 52% of private funding in H1 2024. This dominance was exemplified by Wiz’s record-breaking $1 billion round. The sector’s share of funding in Israel has grown from 20% in 2018 to over 50% in H1 2024, far outpacing the global trend. Out of the last 14 cybersecurity startup acquisitions, 12 were Israeli companies.
M&A Activity Surge – Despite fewer deals, M&A exits reached $4.1 billion, marking a 70% increase from H2 2023. Total M&A activity, including non-exit deals, hit $7.1 billion. This surge indicates strong interest in Israeli tech companies and ongoing industry consolidation.
Global Investor Participation at All-Time High – International investors played a crucial role, participating in rounds that accounted for 93% of all funding – a seven-year peak. This underscores the continued global appeal of Israeli innovation. This is a key point, as the majority of venture funding for Israeli startups comes from overseas funds, and it’s further bolstered by the fact that Accel, Sequoia, Greylock and Index recently raised large funds and publicly announced they will increase coverage of Israel. As an example, Index Ventures, which recently raised $2.3 billion in new funds, invested $60M in 5 Israeli startups since the beginning of the war.
Sector-Specific Trends – While Cybersecurity reached new heights, other sectors showed mixed results:
- Agrifood and Climate Tech grew beyond 2020 levels
- Fintech stabilized at 2018 levels
- Health Tech continued its decline from 2021 highs
- Business Software hit a seven-year low in funding but accounted for 25% of M&A exits
Looking Ahead
The second half of 2024 promises continued growth, with expectations of sustained investment in cutting-edge technologies, increased collaboration with global tech hubs, and further development of innovative solutions addressing global challenges.
Notably, the WSJ and several other outlets reported rumours that Google is advanced talks to acquire Wiz, a fast growing cloud security startup at a whooping $23 billion, representing Israel’s largest exit to date and Google’s largest acquisition ever.
For detailed insights, visit the full report here.
I'm a former general partner at google ventures, head of Google for Entrepreneurs in Europe and founding head of Campus London, Google's first physical hub for startups.
I'm also the founder of Techbikers, a non-profit bringing together the startup ecosystem on cycling challenges in support of Room to Read. Since inception in 2012 we've built 11 schools and 50 libraries in the developing world.
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