Evidence shows that the failure of Israel’s technology sector has worsened

According to figures from the Start-Up Nation Policy Institute (SNPI), $10.4 billion was invested in Israeli startups in the first half of 2022, a sharp drop from $13.2 billion in the same period a year ago.

Funding rounds are also on the downswing. In the year Startups went through 404 investment rounds in the first half of 2022, up from 551 in the same period last year and 491 for the first half of 2020.

“Overall, we’re definitely seeing a slowdown in economic activity,” said Yuri Gabai, CEO of SNPI and former CEO of Startup Nation Central. I think it’s only natural after 18 months of intense activity in the international tech market, including the Israeli tech market. [people] Will sit back and wait and see how this pans out.

As Israel’s ecosystem is closely related to its American counterpart, the same negative trend is across the ocean. If the economic situation in the US worsens, it will also have a significant impact on Israel’s technology sector, Gabay warned.

“For now, we’ve been hurt less,” he said. “Certainly we’re seeing some companies slow down in hiring, but our theory goes to companies that are reducing revenue. If we go into a recession, B2C (business-to-consumer) companies are probably going to be more at risk. B2B (business-to-business) companies are usually more stable this way.” .

The downturn is still in its early stages, so investors and tech companies will have to hold on tight to find out exactly how serious it is.

“We know of a dozen companies that have cut jobs and maybe the same number,” Gabay said. Uncertainty can turn into prolonged stagnation and even recession. Obviously, this will have an impact on companies and individuals, but we are not there yet.

On the bright side, Gabai said, investors continue to flock to Israeli startups despite mass markets. He believes any current setbacks are temporary.

“We must not forget the basics: the world is increasingly digital and online [arenas]He said. “This has been accelerated by the Covid-19 pandemic, and will continue into the future, which means good tech products and services will always get good investment and talent who want to go there.”

Tech layoffs also appear to have snowballed in recent weeks, according to the Layoffs Project website, which tracks layoffs and announcements by Israeli companies.

In fact, in the past week alone, 600 Israeli workers have been laid off at several tech firms, including Verbit, Bizabo, Itoro, Transmission Security, and Lytrics.

Israeli tech companies raised $4.5 billion in the second quarter of 2022, down 31 percent from the same period last year, according to a report published earlier this week by Israel-based Greenfield Partners. Health technology and cyber security were the most heavily invested sectors last quarter, while fintech and crypto lagged significantly behind.

The Greenfield Partners report also noted that the decline is likely to increase in the coming quarters as capital raising is a leading indicator and many deals announced this quarter could be priced in Q1 or earlier.

Nimrod Cohen is the managing partner of TAU Ventures, which he co-founded with Tel Aviv University. TAU Ventures currently has 24 early-stage startups in its portfolio, and Cohen himself has participated in more than 60 investments in the company.

“Things are happening around the world, from global markets to war in Europe and raising interest rates,” Cohen said. “It affects everyone. It’s smart and clear that companies will be more efficient because it’s not as easy to raise money as it was a few months ago.”

Despite this, Cohen argued that most tech workers who are out of a job can quickly get back on their feet and find new jobs because of the ongoing labor shortage.

While times may be tough for some in the tech industry, the ecosystem is not yet in crisis, he said.

“This is the situation two years ago,” Cohen said. I think everyone needs to be more focused and careful in the next few months.

Like Gabbay, there is still hope for the tech sector’s long-term future. “The demand and innovation of new technologies is not something that changes,” Cohen said.