TLDR:
– Israeli startups saw record high capital raising in the second quarter of 2024
– Increase in M&As and IPOs, but many startups are registering abroad
Despite the positive data on capital raising and exits, Israel’s high-tech industry is facing a looming crisis. While numbers look encouraging on the surface, there are several weak points in the local ecosystem that could threaten future growth. A notable concern is the decline in seed and A fundraisings, with most of the capital raises coming from mega rounds for older companies. This trend is accompanied by a decrease in investor activity both locally and globally, with fewer entities investing in Israeli startups.
One of the most alarming trends is the fact that most new startups are being registered outside of Israel, which could lead to a loss of talent, tax revenue, and employment opportunities in the country. This shift could hinder the country’s progress towards becoming a Scale-Up Nation, with the potential for fewer large companies to emerge in the future. Additionally, the focus on artificial intelligence startups is leaving other sectors behind, raising concerns about Israel’s competitive edge in the industry.
Despite the challenges, the high-tech industry has shown resilience in the face of geopolitical uncertainty and global trends. However, the government and the Innovation Authority are urged to step in and support startups during this crisis period to ensure the sector’s long-term success.
