Andreessen Horowitz steps up Israeli investments as local funds struggle to raise capital
Facing a downturn, Israeli VCs take a back seat while U.S. giants dominate the startup scene.
The American venture capital fund Andreessen Horowitz, one of the most prominent investors in Silicon Valley, has increased its activity in Israel, according to the IVC-Gornitzky-KPMG investors report for the first half of 2024. The report notes that the fund invested in four companies in Israel in the first six months of the year. Lightspeed also made four investments during this period, with Insight Partners making three investments. However, many of the older local funds, such as Pitango, Viola, JVP, and Qumra, are notably absent from the list of funds, with each of them making fewer than four investments.
Israeli VCs ranked as the most active funds in the first half of 2024, but three of the top four (Fusion, Iron Nation, eHV Advanced) are micro funds that invest hundreds of thousands of dollars per company. The venture capital fund OurCrowd led the rankings with 16 new investments. Gigi Levy's NFX and Oded Hermoni’s J-Ventures made five investments each. According to IVC, Andreessen Horowitz invested in notable companies like the cyber unicorn Wiz and Seed-stage startups such as the software company Utila, Command Zero, and Bluebricks.
The first half of 2024 has proven difficult for local investors as well. The IVC-Gornitzky-KPMG investor report highlights that the downward trend in capital raising for Israeli venture capital funds, which began in 2023, has continued. In the first half of 2024, only ten Israeli venture capital funds raised money, reaching a total of $554 million for new funds. If this pace continues, 2024 could be one of the worst years for capital raising in the industry. Two large funds, Red Dot Capital Partners and Vintage Growth Fund, each raised $200 million, accounting for 73% of the total capital raised. These difficulties reflect not only a reduction in fundraising but also hesitation among many funds to launch new rounds, given that raising money today from traditional sources, such as American university endowments and pension funds, has become increasingly challenging.
In the first half of 2024, two strategic investment funds raised $600 million: Viola Credit's loan fund and Meitav's secondary fund Valoo. This represents a 64% increase compared to the $385 million raised by two funds in 2023, though it remains far below the highs of 2022, when six funds raised a total of $2.47 billion.
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Israeli institutional investors participated in 13 funding rounds, contributing a total of $40 million in the first half of 2024. This marks the lowest level since 2020 and a sharp decline compared to the $158 million raised across 40 rounds in 2023. As of the first half of 2024, 231 active Israeli venture capital management companies are managing 440 active and fully invested funds. Viola Group manages the largest number of funds (13), followed by Pitango (12), JVP (10), Pontifax and Vertex (8 each), and 83North and TLV Partners (7 each).
