By Steven Scheer
JERUSALEM (Reuters) – Israeli institutions invested $512 million in the country’s tech sector in 2022, down 40% from $1.12 billion in 2021, a published reported showed on Monday, citing a weaker global economy and higher interest rates.
Nearly half, $252 million, was made in the first half of the year when market sentiment was still bullish, according to the joint report from the Israel Innovation Authority, Arnon Segev law firm, Israel Venture Capital and tech advisory firm Consiglieri.
Over the second half of last year, just 16 investments were made by Israeli institutional investors – four of those being early stage seed deals.
“As one might expect, these heavily regulated
and somewhat conservative investors readjusted their investment portfolios due to the shifting economic landscape,” said Yoav Sherman, partner at Arnon Segev.
Israel’s tech sector is a key growth driver, accounting for 15% of economic output, 10% of jobs, more than 50% of exports and 25% of tax income. But institutional investors have not been a big part of its success, with most investment coming from venture capital funds.
Led by mostly foreign VCs, Israeli tech firms raised some $15 billion in 2022.
Institutions accounted for 9-24% of Israeli VC investments last year, down from an 18-49% share in 2021, the report said.
Nimrod Vromen, chief executive of Consiglieri, said that institutions last year had more inclination for early stage investments.
“Israeli institutional investors’ experience in early stage investments, combined with the Israeli government’s commitment to supporting the startup ecosystem amidst political legislative turbulence, signals potential for future investment growth,” he said.
While 2021 numbers may not be replicated this year, Vromen said institutions have changed their focus from being followers to leaders in financing transactions, displaying willingness to support companies even at the seed stage.
“This could spark the revival of Israel’s startup nation,” he added.
(Reporting by Steven Scheer, editing by Ed Osmond)
