Israeli high-tech companies raise $5.6 billion in first quarter of 2022
Cybersecurity and fintech were once more the leading sectors, raising $1.8 billion and $985 million, respectively, in the first three months of the year
The concerns regarding a potentially significant drop in funding of Israeli high-tech companies in 2022 look to be premature, according to the IVC-LeumiTech Israeli Tech Review released on Wednesday. According to the report, Israeli high-tech companies raised $5.6 billion in 212 deals in the first quarter of the year compared to $5.4 billion in 174 rounds in Q1 of 2021. Israeli startup investment activity in the first quarter of the year declined from Q4 of 2021 levels, which reached $8.1 billion in 214 rounds. However, that was to be expected as the final quarter of the year is traditionally busy with mega-deals that close before the end of the year.
Cybersecurity and fintech were once more the leading sectors, raising $1.8 billion and $985 million, respectively, in the first three months of the year. Foodtech companies raised a surprising $341 million, more than double the $148 million from Q1 of 2021.
Unsurprisingly, the number of initial public offerings plummeted, with the negative sentiment on the U.S. public markets deterring companies from going public.
While average and median amounts were down in Q1 of 2022, there were some 14 megadeals in the quarter, over $100 million each, which accounted for a 44% share of total capital raised in the quarter. This continues the trend from last year when 20 deals in the first quarter of 2021 accounted for 54% of total capital raised while 25 rounds in the fourth quarter of last year were responsible for 63% of total funding.
"After a phenomenal year for the Israeli high-tech it seems as though 2022 started with more restraint,” said Timor Arbel-Sadras, CEO of LeumiTech. “Furthermore, it seems that investors have slowed pace and are waiting for a correction in valuation in the private sector, same as happened in the public sector. VC managers need to react to these corrections and make sure their funds keep presenting good performances. These performances rely on the ability to sell or issue their portfolio companies with a substantial increase in valuation versus the investment stage. We witnessed a decrease in the number of IPOs and we expect to see again the dominance of M&As in Exits deals. M&A deals will include both mature startups as an alternative to IPO and also acquisition of early-stage startups by matured ones as an engine to inorganic growth at attractive valuations.”
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Early rounds (Seed and Series A) also continued to demonstrate an upward trend in Q1 of 2022, generating $1.2 billion in 135 deals, with median amounts reaching $4.6 million. Foreign investments’ amounts declined – quarter over quarter, to $4 billion – similar to the 2021 quarterly average. That decrease – mainly in later rounds of investment – was the primary reason for the decline in the amounts invested in Q1, while Israeli investment amounts remained almost intact.
