Annual total funding of high-tech firms in Israel 2010-2023

Israel's high-tech sector experienced a significant downturn in 2023, with total investment falling below 7 billion U.S. dollars, the lowest level since 2018. This marked a dramatic decline of 73 percent from the 26 billion U.S. dollar peak in 2021. Several factors contributed to this poor performance, including a global slowdown in venture capital funding. Local factors include the government’s contentious plan to reform the judicial system and the outbreak of the Israel-Hamas war in October 2023, also played a role.

Cybersecurity and fintech lead the way

Cybersecurity and fintech sectors continued to dominate the Israeli investment landscape in 2023, as they had in previous years. Cybersecurity remained the top-funded tech vertical, drawing approximately 1.85 billion U.S. dollars in annual capital investments, closely followed by fintech firms with nearly 1.5 billion U.S. dollars. Conversely, foodtech ventures experienced the most significant funding decline that year, with investments plummeting over 84 percent year-over-year. Notably, among institutional investors, automotive start-ups led the board in terms of funding, raising 269 million U.S. dollars from financial institutions.

Foreign capital central to Israeli tech ecosystem

Israel’s venture capital sector is heavily reliant on foreign capital inflows. In the first quarter of 2024, foreign investors finalized 323 investment deals in the country, compared to 276 by local firms. In terms of investment value, foreign investors tended to have deeper pockets, making larger investments than their Israeli counterparts. Among venture capital firms, Insight Partners was the most prolific investor as of July 2024, followed by the Israeli companies, Pitango Venture Capital and Aleph.