Startup Nation Central (SNC) today released its report, “A Year of Israel’s Innovation at War,” which analyzes the impact of the ongoing conflict on Israel’s tech ecosystem, including significant disparities between the country’s regions and low levels of trust in government efforts. Among the report’s most notable findings was the financial uncertainty and disparate impact of the war on different regions of Israel.
49% of Israeli tech companies said they canceled investments due to the war, while only 31% said they were confident they would be able to raise money next year. Investors followed this cautious forecast with 48% seeing a decline in investment activity next year, expecting only 31% growth.
The report combines macroeconomic analysis of financial indicators with insights from surveys of managers and investors in the Israeli industry, one of which is aimed at partners and senior managers in investment funds and firms, and the other at founders and CEOs of various technology companies. from early-stage startups to public companies. The report also includes data from the Finder platform.
In the north, the crisis is worse
The worst situation was in northern Israel, where 69% of tech companies expressed great concern about their ability to raise funds in the coming year, the report said. 40% of companies in this region are considering moving their activities completely or partially to other places. The report also found confidence in the government’s ability to lead recovery efforts to be particularly low. Over 80% of companies across Israel doubt this ability, as do 74% of investors expressing similar concerns about the current government’s ability to contribute to the restoration of the local ecosystem.
However, despite major challenges, the report also points to signs of resilience in the local tech industry. According to the report, $7.8 billion has been raised by tech companies since the start of the war, which is just 4% less than the previous year.
In addition, mergers and acquisitions totaled $9.6 billion, slightly down from $10.6 billion a year earlier. The report noted that the overall strength of the local ecosystem was mainly supported by the good performance of the cybersecurity sector as well as companies in the advanced stages of development (growth in scale).
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The report states, “The strength of Israel’s tech ecosystem is bolstered by the strong performance of the cybersecurity sector and growing companies. However, early-stage companies face more significant challenges, highlighting inconsistencies in the ecosystem’s overall resilience.”
According to the report, investment trends in Israel are similar to those in the United States, despite the complexity of the region. The US venture capital market also remains tight, with investors tending to favor domestic funding cycles, as well as expressing uncertainty about a broader market recovery, according to PitchBook reports for December 2023 and June 2024.
The report also shows signs of optimism among some industry players, with more than 50% of companies confident they can grow over the next year and 72% of investors believing Israeli technology can continue to grow despite the development. difficulties.
Avi Hasson, SNC’s chief executive, wrote in the report: “Israeli technology has shown incredible resilience in the face of protracted conflicts and mounting challenges. But this resilience cannot be taken for granted. A lack of long-term planning – whether in budgetary policy, research infrastructure, or the future growth drivers – creating uncertainty that could undermine our momentum. Now more than ever, the government must act responsibly to ensure the sector continues to grow, attract investment and ensure the future of our economy.”
He added: “There is a consensus in the industry. Confidence in the government’s ability to restore and grow the tech sector is worryingly low, despite valuable and swift action,” and “the current instability is causing many Israeli companies to rethink their business.” next steps should be taken to ensure the development of their businesses”.
Hasson called on the government to “work to protect Israel’s economy and demonstrate its commitment to the development of the technology sector, which is essential to the well-being of all its citizens.”
Globes, Israel business news – en.globes.co.il – published on September 12, 2024.
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