Photo: Lobby of the Tel Aviv Stock Exchange. Photo: Yaniv Morozovski via Wikimedia Commons.
CTech – Investments in Israeli high-tech companies fell to $4.5 billion in the second quarter of 2022, a 31% drop compared to the same quarter last year, according to a report prepared by investment firm Greenfield Partners seen by Calcalist .
2021 was a record year for local technology, with total investments of a new 26 billion dollars. However, while the decline was widely expected to come in 2022, few believed it would be to such an extent, and data from Greenfield Partners showed that the number of funding rounds also fell, from 135 in the second quarter of 2021 and 132 in the first quarter of 2022, to only 104 in Q2.
One of the most interesting developments is the slowdown in the number of unicorns raising funds while increasing in value. For example, in the second quarter of 2021, such as Gong increased to $7.2 billion, Next Insurance increased to $4 billion, and Porter increased to $3 billion. However, only one local unicorn raised funds in the second quarter of this year, with blockchain startup Starkware raising its valuation to $8 billion.
The explanation for this phenomenon is the fear that grips many unicorns and their investors who realize that in the current market it will be difficult for them to justify the valuations they received last year. Many companies that have raised over $1 billion in 2021 are currently focusing on maintaining their cash reserves and minimizing any unnecessary expenses, including layoffs despite raising significant amounts last year.
According to the Greenfield report, there was a 50% drop in the number of rounds completed by growth companies in Q2. There were 13 rounds of $50 million to $100 million in the second quarter of the year compared with some 26 in the same quarter last year.
The report also showed an increase in M&A transactions, with six completed in April and May, but 11 announced in June. These deals likely passed the mark last month after the acquired companies realized they weren’t going to get better offers at this point.
According to Shay Grinfeld, managing partner at Greenfield Partners, the Q2 data is evidence of a continued downward trend in startup investment given the current macro environment and declines in public markets.
