Israeli startups raised $3.1 billion since war began on Oct 7

Men walk near high-rise buildings in the high-tech business area of Tel Aviv

By Steven Scheer

JERUSALEM (Reuters) - Israeli high-tech startups are still raising funds despite the country's war with Palestinian Islamist group Hamas, although at a slightly slower pace, Startup Nation Central (SNC) said in a report.

Since the start of the war, sparked by Hamas' shock attack on Israel on Oct. 7, there have been 220 private investment rounds with $3.1 billion raised, the non-profit organisation reported, with security technology firms accounting for one-third of funds raised.

Next Insurance raised the highest amount for a single company with $265 million from two foreign venture capital funds.

In the prior six months - the second and third quarters of 2023 - fundraising was $4.3 billion in 330 rounds.

SNC said the Israeli tech sector remained strong despite challenges such as a reduced workforce, as some 15% of tech workers were drafted into military reserve duty, and with funding gaps for smaller startups.

"With attractive valuations and significant growth potential, the Israeli tech ecosystem is showing characteristic resilience," said SNC CEO Avi Hasson in a statement.

He predicted a new wave of innovation and opportunities for the sector after the war.

Mergers and acquisitions activity since Oct. 7 has also been robust totalling $3.7 billion, with two deals comprising nearly $1 billion and nine others above $100 million, SNC said.

Among them were Talon Cyber Security, which was bought by Palo Alto Networks for $625 million in November 2023. Palo Alto also acquired Dig Security for $350 million a month earlier.

In the second and third quarters, M&A activity totalled $1.4 billion.

The high-tech sector drives Israel's economy and accounts for 16% of employment, more than half of Israel's exports, a third of income taxes and nearly a fifth of its overall economic output, according to Bank of Israel data.

(Reporting by Steven Scheer; Editing by Alexandra Hudson)