Israeli Tech Resilience

Nine months after the October 7 incident^NumberIsraeli tech industry figures gathered at Tel Aviv University for the annual AI/Cyber ​​Week.

Startups have been hit hard by the war, with founders and employees facing personal losses and displacement, and 10-30% of the tech workforce being conscripted—no small ripple effect given the large role Israel’s tech sector plays in the country’s economy.

Negative attitudes toward Israel also exacerbate the situation: According to a survey published in June by Israel Advanced Technology Industries, 65 percent of venture capital funds report challenges due to Israeli identity, and more than 30 percent of Israeli companies and startups have shifted their activities abroad.

Israel's technology industry accounts for 18% of its GDP, more than 10% of the US GDP and 6% of the EU GDP. The sector accounts for 50% of all exports and 30% of the country's tax revenues.

Jon Medved, CEO of OurCrowd, and Eyal Niv, Managing General Partner at Pitango Venture Capital, represent two of Israel’s largest and most active VC firms. They shared their perspectives on the impact the war has had on fundraising, philanthropy, and the challenges and resilience of the Startup Nation.

Amy Gutman: Events since October 7^Number Has it affected your investments?

John Medved: The war comes at a particularly bad time. Investment in venture capital-backed companies has slumped globally in recent years. Investment in Israel fell from $26 billion in 2021 to $6.9 billion in 2023.

Add to this the war, the reservists, and negative attitudes outside of Israel, and you have problems. The good news is that this is a tale of two tech cities. Strong Israeli companies are not only piercing the fog of war and the global environment, but many of them are thriving. Wiz raised the largest fundraising in Israeli history in the middle of the war, raising $965 million at a $12 million valuation.

*Author's note: The WSJ recently reported that cloud cybersecurity company Wiz is in acquisition talks with Google's parent company Alphabet for $23 billion, “on the brink of the biggest tech exit in years,” a deal that could be “one of the biggest and fastest profits for a private security company in tech history.”

James: The latest data for 2024 shows that over $4.5 billion has already been invested in the first six months and is likely to reach $10 billion for the year, an increase of almost 50%. There is no similar increase globally. It is a turbulent environment, but it shows that Israel is resilient. Early stage companies looking for Series A are suffering.

Eyal Niv: Thirteen of the 14 recent exits in the cyber space were Israeli companies. People are buying companies for the long term. But we'll start to feel the impact in the next year or two.

AG: How has your own behavior changed since the events of October 7th? Are you investing in the same number of companies as before or fewer?

James: We don't just invest from a single fund. We raise money every day. We have to find great companies. It's up to you to lead or follow others, but then we have 250,000 investors in 195 countries around the world. We invest our own money. We're holding our ground despite global recessions and wars. In this environment, flat is the new up. We're not going to spend money we don't have. It's a complicated environment.

Japanese: We have reopened with the same investment pace. Cyber ​​will continue to grow in the long term. Threats are growing around the world. Opinion engineering has become a weapon of government and everyone must protect themselves. Generative AI continues to be an area of ​​great interest. Generative AI for cyber and cyber for generative AI.

AG: Please explain each of the new funds you have launched since October 7th.^Number And what are the differences between them?

James: When the war broke out, we quickly realized there was going to be problems, especially with early stage companies. They needed someone to lead their seed/series A rounds. So we started the Resilience Fund with about $15 million and invested in 46 companies. We raised the money with no management fees or interest. Essentially free. Other groups did the same.

Japanese: We've done an initiative called Iron Nation, which supports a lot of startups and connects people from all over the world directly to Israeli startups, bypassing the infrastructure. We also created the Israel Children's Fund for over 400 children who lost their parents in terrorist attacks. We're going to leverage the power of the tech, cyber and business communities to help these kids get the support and the foothold they need in life.

AG: How has negative sentiment towards Israel affected institutional investment?

James: It's not much, but this is something we must be fully aware of, monitor and counter, because if the Israeli brand becomes the brand of a genocidal, predatory apartheid state, it will be a huge strategic danger for the country. This is not good for business, especially for future-oriented, progressive and inclusive tech companies. Multinational companies have worked strongly with Israel, while we cannot stand by and watch university researchers abandon Israeli research.

Japanese: We live in a global ecosystem, and we have to make sure that when this war is over, we are back to where we were the day before in terms of our business and our brand.

AG: Last question: What are the top two companies in your portfolio?

James: There is a company called Hailo, which is an AI chip maker for edge devices. It has raised more than $300 million to date and is valued at over $1 million. The second is BlueGreen Water Technologies, which cleans up toxic algae blooms in waterways. Algae blooms pollute the water and emit methane, which is responsible for 10% of the world's greenhouse gases. They can purify the water and the air at the same time.

Japanese: Two companies are gearing up for big things: AppsFlyer, a mobile app tracking and analytics platform, and VIA, which manages public transport systems.