The Israel-Hamas conflict that has lasted nearly 10 months has tested the resilience of the startup ecosystem in Israel, especially in the fields of cybersecurity and AI.
Data from the Israel Innovation Agency (IIA) shows that in 2022, the technology industry contributes more than 18% of GDP and accounts for half of this country's export turnover.
According to information from Techcrunch, since the beginning of 2024, 11 Israeli technology companies, mainly in the fields of cybersecurity and AI, have been acquired with a total value of more than 2 billion USD. Notably, Nvidia's acquisitions of Run.AI and Desi, as well as Blackstone's acquisition of Priority, are notable.
Cybersecurity unicorn Wiz, which recently raised $1 billion in the largest funding round ever by an Israeli startup, is reportedly in talks to be acquired by Google for $23 billion. .
However, the conflict also affected the flow of venture capital in Israel. Data show that this sector has decreased by more than 70% compared to the same period last year.
Israeli startup fund from January 1 to May 16, 2023 compared to 2024
According to Mr. Dror Bin, CEO of IIA, raising capital in the early stages of startups without revenue has become more difficult due to conflicts. In addition, cyber attacks targeting many important sectors of Israel have increased, causing more than $3 billion in damage since October last year.
However, despite the difficulties, Israel's cybersecurity industry still plays an important role in protecting the country from cyber attacks. Mr. Jon Medved, CEO of venture capital fund OurCrowd, said that fundamentally, the conflict does not change Israel's need to protect against hackers around the world.
Cybersecurity and AI are still areas that attract investment capital
Mr. Medved, who runs Israel's most active venture capital firm, said the war has certainly been difficult for Israeli investors. Not only are there cases of companies having key personnel serving in the reserves, but many global investors also want to wait for the war to end before committing large capital investments to Israel.
Even so, venture capital funding increased in the first half of 2024, boding well for the ecosystem. Private capital in Israel in the first half of 2024 increased by 31%, reaching $5.1 billion. According to Startup Nation Central, a non-governmental organization specializing in research on Israel's technology ecosystem, the cybersecurity sector plays an important role with 52% of total private investment capital, showing a global trend. in this field is promoting investment activities.
Startups in popular fields such as cybersecurity and AI continue to be funded, demonstrating the important position and attraction of these two fields to investors. Typically companies like WIZ, Hailo and AI21 Labs.
Typical of the rise of AI in Israel is Hailo, an OurCrowd portfolio company that specializes in manufacturing AI processors for terminal devices, known for its high performance, low cost and Low power consumption. Recently, Hailo raised $120 million at a $1.2 billion valuation amid the escalating conflict.
The role of domestic investors
To support startups affected by the war, the Israel Innovation Authority launched the Fast Track program to provide grants to early-stage startups that have no revenue and are having difficulty raising capital.
Source: From Techcrunch
The program has raised more than $100 million, along with an additional $150 million from the private sector, to support 250 early-stage startups. OurCrowd also launched the Israel Recovery Fund last December with the goal of raising $50 million (it has raised $17 million as of March) to support startups affected by the war or developing solutions. measures related to Israel's immediate needs such as reconstruction, emergency medicine, food security, media surveillance and cybersecurity.
Clearly, the Israel-Hamas conflict has posed huge challenges but at the same time has promoted the spirit of resilience, adaptability and innovation in Israel's technology ecosystem. With available potential and timely support, the Israeli technology sector, especially cybersecurity and AI, is expected to continue to grow strongly and affirm its pioneering position in the international arena.