Tech sector in Israel attracts $3.1 billion since beginning of war in Gaza

A recent report compiled by Startup Nation Central, an organization dedicated to promoting the Israeli tech sector, revealed the Israeli tech industry has raised $3.1 billion in funding since the terrorist organization Hamas invaded Israel on Oct. 7, launching a war that has been raging ever since.

The report indicated that the Israeli high-tech industry has remained resilient despite immense challenges for the country for almost half a year. Approximately 15% of the tech sector workforce was called up for military reserve duty. While some have returned to civilian life, thousands still wear the IDF uniform, fighting against Iranian terrorist proxies Hamas in Gaza and Hezbollah in the north.

Another challenge has been the cancellation of flights by many international airlines to and from Israel's main transportation hub, Ben-Gurion International Airport in Tel Aviv.

Despite this, Startup Nation Central (SNC) reports that the Israeli tech sector has seen 220 private investment rounds at $3.1 billion, with an average investment size of $19 million, however, the amount is somewhat skewed by several large fundraisings before the conflict.

The past six months witnessed 12 funding rounds of more than $50 million each, primarily in the cybersecurity sector, which attracted $1.1 billion, Fintech and corporate software also saw considerable investment, jointly adding up to about half a billion.

The mergers and acquisitions (M&A) market in Israel, particularly in cybersecurity, underscores the trend of Israeli startups being acquired for significant sums, but may also raise concern about the premature sale of technologies rather than establishing Israel-based corporations.

In addition to foreign investment in the tech sector, Israel has seen the establishment of over 20 new venture capital funds, raising a total of $1.7 billion. This includes $500 million by Team8 and $250 million by Red Dot Capital, with a portion dedicated to emergency funds supporting startups affected by the conflict.

Dr. Avi Hasson, the CEO of SNC and the founder of the Israel Innovation Authority, recently shared his optimism about the future of Israel's respected high-tech sector.

"I am less worried today than I was during the judicial overhaul period," Hasson explained, "because in the end, more than anything else, our most important asset is the human capital. Israel is a hub of human, entrepreneurial infrastructure, with a unique environment, making it suitable for building startups.”

The top Israeli tech executive admitted his initial concern that the onset of the war put the future of Israel's tech industry at risk.

“This was the first time I really feared that people would leave the country. CEOs of multinational companies told me at the time that they had never received so many applications for relocation,” Hasson said. 

"Now things have reversed, and this trend has fallen off the agenda: many of them, who only a few months ago prepared their foreign passports and registered their companies abroad, are today in a state of mind of 'we stay and fight, we stay and influence.'”

International businesses generally appear to be upbeat about the future of the start-up nation. A recent poll conducted by the global accounting company Ernst & Young showed that some 60% of multinational companies expressed confidence in the Israeli tech industry. In fact, only 10% of those businesses believed that the Gaza War would have a devastating impact on their business in Israel. 

Prof. Yossi Matias, CEO of the Google Research and Development Center in Israel, conveyed confidence in the resilience of the Israeli tech sector. 

“Looking ahead to 2024, despite the challenging period, part of our essential role, is to be optimistic as some of us impact what will happen in the future, and I allow myself to be optimistic despite the difficulties and despite what we are going through and experience,” he assessed.

Matias voiced cautious optimism that the Israeli tech sector would eventually emerge even stronger after the war. 

“I believe that through further collaboration, partnership, focus on education and research, working through the complexities and, of course, supporting our people – those in reserves, too – and by putting in the necessary effort, we will be able to retain our strength, grow and come out of this challenging year even stronger,” he said.

Despite its relatively small size, Israel has emerged as one of the world’s most vibrant centers of technological innovation outside of California's Silicon Valley.