Israeli VC funds are experiencing a major slowdown

Israel’s venture capital funds experienced a major slowdown in the first half of 2024, according to the IVC – Gornitzky – KPMG Investors Report published today. The report shows that the attracted funds and the activities of investors continue the trend observed last year.

The report found that only ten new Israeli venture capital funds raised capital in the first six months of 2024, totaling $544 million, a sharp decline from 2023, when 27 funds raised $1.6 billion. Moreover, this year, two large funds – Red Dot Capital Partners and Vintage Growth Fund – were responsible for 73% of all funds raised, each of which raised $200 million.

The report found that even among Israeli institutional investors, activity has declined significantly. In the first half of 2024, institutional investors participated in 13 investment rounds totaling $40 million. That number is a sharp drop from 40 rounds in 2023, totaling $158 million.

Led by the venture capital fund OurCrowd

Among large Israeli venture capital funds managing $200 million or more, OurCrowd, which is said to manage almost $2.5 billion in the report, led the market with 16 new investments in the first half of 2024. OurCrowd’s number of investments was the same as the sum of all its investments in the first half of 2024, 2023.

Following OurCrowd was the IN Ventures fund, which manages $250 million in capital and made four investments in the first half of 2024. Pitango, the largest venture capital fund under management with about $3 billion, completed just three deals during this period. Hetz Ventures Management, Hanaco Ventures, Cardumen, and Aleph each made a total of three investments in the first half of this year, totaling $282 million, $740 million, $225 million, and $845 million in capital under management, respectively.

Some prominent players among foreign venture capital funds have also seen a significant decline. For example, Samsung Next made only three investments in Israeli startups in the first half of 2024, compared to 13 in all of 2023. However, funds such as NFX maintained stability with five investments in the first half of 2024. Funds such as Andreessen Horowitz and Lightspeed have also increased their activity in the Israeli market, the report said.

AI attracted investors

In terms of investment trends, companies in the field of generative artificial intelligence attracted the most investments with 26 deals, while fintech and cybersecurity took the second and third places. At the same time, there was a noticeable decrease in investments in the automotive and deep technology sectors.

Despite the challenging landscape, the report shows that there is still considerable free capital available for investment in Israeli technology companies. The report shows more than $10 billion in free capital (dry powder) for the first half of the year, of which $2.4 billion is earmarked for investments in new companies.

“We did not expect 2024 to be a normal year due to the ongoing war and instability. Analysis of investor activity in the first half of 2024 reflects a difficult period for Israeli venture capital funds,” said Ben Klein, CEO of IVC. According to Klein, the results of the current report show that “the total capital raised by Israeli venture capital funds has decreased compared to previous years, but the market remains stable with significant free capital for investments. We expect that in the near future, investors will continue to invest in their portfolio companies. they will prefer to pay attention and choose new companies selectively.

Globes, Israel business news – en.globes.co.il – published on September 10, 2024.

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