Israel's Tech Sector Surpassed $12 Billion in Funding in 2024, Solidifying Its Role as a Scale-Up Powerhouse, According to New Report

TEL AVIV, Israel , Jan. 16, 2025 /PRNewswire/ -- Startup Nation Central, a nonprofit that promotes the Israeli innovation ecosystem globally, has released its 2024 annual report titled THE POWER OF SCALE: Israeli Tech Global Edge. The report provides an in-depth analysis of the country's tech landscape based on data and insights from its ecosystem business-engagement platform, Finder. Despite the ongoing war and local challenges, Israel's tech ecosystem proved its resilience, evolving from a startup hub to a scale-up powerhouse with larger funding rounds, a growing number of mature companies, and a surge in acquisition-driven exits.

Israel's tech sector secured over $12 billion in private funding, achieved record M&A activity of $15.8 billion, and drove economic growth, with high-tech GDP rising by 2.2% even as the overall economy contracted. The report highlights Israel's leadership in sectors like cybersecurity and its evolution into a scale-up powerhouse, marked by mature companies, strategic acquisitions, and global integration, solidifying its role as a cornerstone of the Israeli economy.

"In 2024, Israel's tech ecosystem showcased resilience and adaptability despite domestic uncertainties and geopolitical tensions. Global dynamics, particularly U.S. investment trends, helped Israel maintain its status as a global innovation hub and leader in sectors like cybersecurity. The ecosystem has matured into a scaleup powerhouse, supported by multinational corporations deeply involved in its success. But maintaining this edge demands proactive policies, strategic investments, and a focus on new growth engines", said CEO of Startup Nation Central Avi Hasson. " As we enter 2025, the return of President Trump and the ongoing development in the Middle East introduces fresh opportunities for Israel's tech ecosystem, potentially deepening Israels' collaboration within the region and opening new pathways for innovation and investment", added Hasson.

"In 2024, Israel's tech ecosystem continued its transformation from a startup-centric model to a scaleup powerhouse. This shift is defined by larger funding rounds, a growing number of mature companies, and increased acquisition-driven exits. Scaleups have moved from being acquisition targets to active acquirers, building broader ecosystems and driving sustained growth and value creation.  This indicates the strength of Israel's scaleup ecosystem and its ability to attract substantial global investment. While scaleups represent just one-tenth the number of startups, they employ nearly twice as many people, emphasizing their critical economic and societal impact," said Yariv Lotan, VP of Digital Products and Data at Startup Nation Central.

Key findings from the report:

• Israeli tech companies raised $10.6 billion in reported funding —a 28% increase from 2023's reported $8.3 billion. Accounting for yet-to-be-reported rounds and rounds with undisclosed amounts, the total funding is estimated at $12.2 billion, reflecting a 31% increase compared to the previous year's adjusted figure.
• This growth aligned with U.S. VC trends and outpaced Europe and Asia despite a sharper global decline in investment rounds in those regions.
• Early rounds (pre-seed to Series A) accounted for 82% of deals, while late-stage funding saw its dollar volume peak, nearing 2021 levels.
• The median funding amount in Israel reached $8 million, marking a return to its long-term growth trajectory and indicating sustained investor confidence.
• In 2024, Israeli tech saw 15 mega-rounds totaling $4 billion, accounting for 41% of total funding. This marks a sharp rise from 2023's nine rounds and $2 billion (22%), showcasing the strength of the scale-up ecosystem and the ability of established companies to attract substantial global investment.
• Cybersecurity maintains its upward trajectory, representing just 7% of Israeli tech companies yet securing 36% of total funding with $3.8 billion. A 90% surge in funding and median rounds of $18M underscore its critical role in the ecosystem.
• 2024 marked Israel's strongest year for acquisition-driven exits, with total deal values reaching $15.8 billion, marking a 49% increase compared to 2023.
• The number of M&A events also increased, with 104 transactions recorded in 2024, a 25% year-over-year rise.
• An equal-weight index of the top 70Israeli tech companies traded on NASDAQ rose by 15.8% in 2024, outperforming the NASDAQ 100 equal-weight index, which increased by 9.4%.
• The Israeli tech ecosystem, with a GDP share double that of the U.S. tech sector, led Israel's economic growth with a 2.2% increase in high-tech GDP (Q1–Q3 2024), while the overall economy contracted by 1.5%. 

Challenges Facing the Ecosystem 
While these achievements highlight the strength of Israel's tech ecosystem, several challenges must be addressed to ensure sustained growth:

• The global trend of fewer newly founded startups is taking a toll on Israel's innovation pipeline. While the quality of existing companies remains high, the declining quantity of new entrants limits the diversity of future opportunities.
• A reduction in the number of investment rounds globally constrains early-stage innovation, shrinking the pipeline for new technologies. Balanced grants and incentives could foster more opportunities for early-stage companies.
• Judicial and economic uncertainty, coupled with regional instability, poses significant risks to Israel's competitiveness, challenging investor confidence.
• Israel's historically diverse range of innovation sectors is narrowing due to reduced funding for startups in emerging areas. Providing targeted incentives to investors and multinationals could help sustain growth across sectors.
• As AI reshapes industries globally, Israel must secure resources, talent, and R&D capabilities to remain competitive. Proactive government support, strategic focus, and agile regulation will be essential to foster growth in this transformative sector.

To sustain its position as a global innovation leader, the government plays a pivotal role in securing Israel's tech future. Addressing political and economic instability through clear, consistent policies is essential to bolster investor confidence. Investments in education, academic research, and innovation infrastructure are crucial for cultivating the talent and technologies needed for global competitiveness. Additionally, tax benefits and targeted incentives for investors and multinational corporations will ensure high-tech growth continues to drive the economy. The absence of a comprehensive long-term plan, weakening education systems, and underinvestment in academia and industry are eroding the nation's competitive edge. Without immediate and decisive action, Israel risks falling behind global leaders in transformative fields like AI, quantum technologies, and other emerging industries critical to the future of innovation.

2025 Forecast Outline

1. U.S. economic and financial trends will continue to shape Israel's tech ecosystem performance.
2.  Investors will focus on high-quality opportunities in sectors with long-term growth potential. Additionally, Israel is expected to benefit from increased investments as regional instability eases, mirroring trends observed in previous post-tension periods.
3. Private funding is expected to increase, with scale-ups continuing to drive ecosystem impact.
4. AI is set to become a cornerstone of venture strategy, with vertical implementations driving value and return on investment (ROI). Significant investments in AI infrastructure, such as data centers, are anticipated to support this growth.
5. Cybersecurity will remain a top investment priority, delivering significant exits through acquisitions and IPOs.
6. M&A activity will remain strong, and the IPO market may reopen, providing additional exit opportunities.

The data presented in the report reflects ongoing efforts by the Finder team, integrating the leading proprietary and public databases and proactive updates from investment funds. The report also includes commentary from executives at Jeffries, WIX, Armis, Israel Innovation Authority, Insight Partners, BioCatch and Aaron Institute for Economic Policy.

The full report, THE POWER OF SCALE: Israeli Tech Global Edge, is available here.

About Startup Nation Central: Startup Nation Central helps global solution seekers tackle complex challenges by giving them frictionless access to the expertise and solutions of Israel's problem solvers - and their bold and determined approach to innovation. We call this Impatient Innovation.

Our free business engagement platform, Finder, grants unrestricted access to real-time, updated information and deep business insights into the Israeli tech ecosystem, explore potential opportunities, and forge valuable business connections.

SOURCE Startup Nation Central