Funds pour into Israeli startups

Cash flow for Israeli startups is plentiful right now and the local innovation scene is in the limelight, according to the recently released Startup Snapshot report, based on data from more than 200 local startups. COVID-19 has met challenges, but local businesses continue to prove their ability to pivot and innovate and have raised a record capital of $ 5.37 billion in the first three months of 2021.

“So much new money has poured into the Israeli ecosystem over the past two years, there are so many new investment funds and new investors who have money to deploy,” Tzahi Weisfeld, vice president and general manager of Intel Ignite, one of the report’s authors, told NoCamels.

SEE ALSO: Israel’s tech sector experiences modest growth in 2020, chronic employee shortage persists

Startup Snapshot, a data sharing platform for the Israeli startup ecosystem, was compiled by Y. Benjamin Strategic Marketing in partnership with LeumiTech, Intel Ignite and Fiverr.

“The funds are pouring in,” said Nimrod Vromen, partner Yigal Arnon & Co and CEO of Consiglieri, in a press release. “In 2021, investors are looking for more active involvement in monitoring spending and ongoing business activities, trying to protect themselves in today’s uncertain market environment.”

Tzahi (Zack) Weisfeld, general manager of Intel Ignite. Courtesy

“Everything is on steroids. Governments are going to invest a lot of money because they understand that they have not acted quickly enough in recent years. So there is a lot of money going to be spent on technology, ”Weisfeld explains.

Tech unicorns, record funding rounds, and high valuations are reported almost daily in the Israeli tech ecosystem.

Just this week, Salt Security announced a $ 70 million funding round, Wiz added $ 120 million to its coffers, and Valens is expected to be listed on the New York Stock Exchange for a valuation of $ 1.16 billion.

“The speed of closing a cycle has been almost halved compared to before COVID, with 29% of companies closing a cycle in less than two months,” Weisfeld said.

“It is interesting to see the impact of COVID-19 on early stage startups. If at the start of the pandemic these startups were at a disadvantage in terms of fundraising, the excess capital on the market led to a high level of investment in the first rounds. At the same time, in light of the uncertain market environment, we see investors seeking more protection and therefore asking for more restrictions when it comes to closing transactions. For this reason, I believe that startups will seek to diversify their types of financing, with credit products appearing more significantly in their portfolios, ”said Nurit Pirani, head of the LeumiTech business center.

Additionally, an OECD analysis of the global impact of COVID-19 on SMEs and entrepreneurs mentions Israel as one of the countries now benefiting from a booming start-up finance arena.

Photo by cottonbro from Pexels
An illustrative photo of people working. photo by cotonbro of Pexels

“We’re really quick when it comes to solving a problem,” Weisfeld says of the community of local innovators.

The Startup Snapshot report shows how Israeli startups are growing with the current market rocked by COVID-19, how they are strengthening their teams, increasing their funds and expanding to new locations overseas.

The report cites that the competitiveness of the local hiring market to fill thousands of vacancies forces around 13% of startups to look overseas to hire employees.

The effects of COVID-19 are also changing the way business is conducted. The report shows that to be successful in the tech industry, companies must now navigate a new hybrid model of remote, home and office work.

There are pros and cons to this new mixed situation. With working from home and remote working now part of the business lexicon, the founders are less constrained in terms of where their employees work. The report shows that 21 percent of companies said the location of their first employee overseas is no longer important.

And while face-to-face sales pitches are preferable, being able to listen to a recorded video call has its advantages, Weisfeld explains.

SEE ALSO: Israeli startups adapt to COVID reality but face key challenges – Report

“The first part of sales is essential for founders to understand what customers expect and want. We work with startups and founders to go back and listen to more than they could ever get from real sales during a face-to-face engagement. It is now possible to go back to the recording and say: “let’s listen carefully to what they just said”. So, there can be a lot of learning in these recorded calls which did not happen before. So that’s a plus, ”he says.

On the other hand, distance communication negatively affects business relationships and sales.

“The ability to bring people together and brainstorm ideas is important and right now we are challenged [to do this]. A hybrid future will need to provide solutions to this need because it is essential, ”Weisfeld told NoCamels. “The inability to spontaneously organize meetings hurts entrepreneurs.”

“41% of startups that have raised funds in the past nine months have done so without meeting their investors face to face. With digital meetings replacing face-to-face interactions, start-ups struggle to build credibility with investors they’ve never met in person. Successful startups will be able to exploit vast funding and international business opportunities, ”said Yael Benjamin, founder of Y. Benjamin Strategic Marketing, in a statement.

And if the near future looks rosy overall, the risk of too rapid business growth seems certain.

SEE ALSO: 10 Israeli-Founded Companies Achieve Unicorn Status in Q1 2021

“Big failures are inevitable,” says Weisfeld, a seasoned executive and serial entrepreneur, with three decades of experience in the consumer and tech company markets. “The SPAC phenomenon, these super, super big fundraisers, some of them are going to end painfully. But I think that in general the larger flow of funding is going to create more opportunities… to fund more tech experiments and more startups. The biggest challenge is that we don’t have enough talent.

Recognizing failure is an often-repeated innovation factor in general, and of local technology in particular. “It’s an amazing time to be in this industry,” Weisfeld sums up.

About Keith Tatum

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