Israel VC funding reaches new low – report

A new low has been reached in fundraising by Israeli venture capital funds, the country’s main vehicle for investment in Israeli privately-held tech companies, which over recent years has developed the Startup Nation and transformed Israel into a country with a tech industry with nearly 400,000 employees, representing 11.3% of all employees.

Since the beginning of the year, 12 Israeli venture capital funds have raised just $260 million. This is a fundraising rate so low that if it continues until the end of 2025 will see total fundraising this year 40% down from the $1.27 billion raised in 2024. Fundraising is so low that the amount raised in 2025 leaves about $208 million available for investment, net of management fees and expenses.

Nine of the 12 Israel funds that have so far managed to raise funds during this difficult period are new venture capital funds that have been established since 2024. In the most optimistic scenario, the report’s authors, IVC, Gornitzky, and KPMG, estimate that 2025 will end with a maximum of $350 million raised. It is difficult to compare 2025 to boom years like 2021 or 2022, when Israeli venture capital funds raised huge amounts of over $6 billion on average per year, but even compared with more modest years, this is a dramatic decline. In 2016, Israeli funds raised $1.98 billion, and last year, during the war, $1.27 billion was raised.

31 Israeli funds are in various stages of raising funds,

Surprisingly, two Israeli funds currently looking to raise more than $100 million are relatively unknown: Aaron Applbaum’s Kinetica fund, which plans to raise $150 million, and Yoav Rosenberg, Dorit Dor, and Maya Netzer’s Cubit fund, which is raising $100 million. These fundraising efforts are ongoing. Red Dot venture capital fund, which announced a $320 million fundraising only last July, raised it all last year, according to the report. Furthermore, none of the major Israeli funds – Pitango, Viola, Vertex, or StageOne – are in fundraising stages, according to the report. In 2024, only five funds managed to exceed the $100 million threshold: Picture Capital ($112 million) founded by Israeli cybersecurity executives; Gil Dibner’s Angular Ventures, managed from London, with $125 million; gaming fund V Games with $142 million; Vintage’s fifth growth fund with $200 million and Red Dot’s third fund with $320 million.

The IVC, Gornitzky and KPMG report found that 31 Israeli funds are currently in various stages of raising, with a cumulative amount of $1.2 billion, if and when they manage to raise the capital they are seeking. However, the success rate is diminishing. The percentage of funds raising and reaching their target has been gradually decreasing since 2018, when 87% of funds reached their target, falling to 45% in 2023 and 29% last year.

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“The data indicates a decline in initial investments and new capital raisings, with only 12 new venture capital funds established in the first half of 2025,” says Adv. Yuval Horn, chair of the Technology and Life Sciences Practice at Gornitzky GNY law firm, one of the authors of the report. “Foreign investors reduced activity in initial investments, while Israeli investors maintained a relatively stable presence.”

What are the reasons for the shrinking of Israeli venture capital?

The report reveals a sharp change at the top of active funds, with names that stood out in the first half of 2024 such as OurCrowd, Fusion and J-Ventures slowing their investment pace, and in their place funds such as F2, owned by Genesis ex-partners, which reached the top with five new investments, Daniel Recanati and Doron Zaor’s Earth & Beyond, Assaf Jacobi’s Jibe Venture, and the US fund Lightspeed – one of the biggest beneficiaries of the Wiz exit.

Lightspeed also leads the investment table of foreign funds in Israel, which maintained a steady pace of 3-4 new investments in the first half of 2025. Sequoia, for example, increased its investment pace in Israel with three investments in six months, while Andreessen Horowitz disappeared from the list, as did Index. Accel Fund resumed investments in Israeli startups with three investments in the last half.

What is the reason for the alarming contraction of Israeli venture capital funds? They do not disclose performance data to the public but keep their information close to their chest with only a few private investors revealing numbers. Estimates are that investments by Israeli funds in particular is low, with a few exceptions, and yet the effects of negative sentiment towards Israel in the war cannot be eliminated. Another alarming figure marks the disappearance of corporate venture capital funds from the Israeli landscape, with their investments in early-stage companies in the local tech industry in just single digits. Over the last few years, corporate funds such as Samsung Next, Verizon Ventures and others closed in Israel, and stopped investing.

“The Israeli market is converging”

This is a worrying situation, but it is not only foreign investors who are reducing their investments in Israeli companies – Israeli institutional investors that were the major financiers of the industry during the boom years are also cutting investments. Although investments of Israeli insurance and pension companies are at a high level relative to the annual average, most of the amount – $69 million out of $87 million – is allocated to follow-up rounds in existing investments and not directed to new investments.

Among the institutions, Harel has become the biigest investor with 33% of all investments in companies, compared to only 10% next year; Phoenix has doubled its participation rate from 9% to 18% this year; Clal has decreased from 14% to 10% this year and Migdal has dramatically reduced its participation rate in investments in Israeli tech companies among the institutions, from 9% to only 2%.

“The Israeli market is converging: The decline in capital available for investments forces funds to choose carefully “The balance is new investments,” says KPMG Israel head of technology Dina Pasca-Raz. “At the same time, foreign investors are also becoming more selective, their share of total investments has fallen to 49%, and due to their involvement in later stages, the average ticket is also larger, a median of $2.4 million compared with $1.3 million for Israeli investors. The result is a bipolar market in which AI and cybersecurity companies manage to raise huge sums, while sectors that require long-term development such as cleantech and life sciences are being pushed to the margins.”

Pasca-Raz adds: “A real drama is taking place at younger companies: promising startups that were founded only six months to a year ago, especially those located at the core of AI , manage to raise funds relatively easily. In contrast, companies that were established 2-3 years ago, and already have an established product and initial revenue from paying customers, are having difficulty raising A rounds. It seems that generative AI is creating a level of expectations that was unimaginable until two or three years ago, both in terms of the speed of development and the level of market entry, and it seems that companies that were considered good and promising and progressed in accordance with “old” expectations are having difficulty keeping up.”

Israel Innovation Authority growth division head Kerem Nevo said, “Data for the first half of 2025 indicate a sharp decline in the amount of fundraising by venture capital funds in Israel, from $2.2 billion in 2023 to about $260 million this year. This is a global trend of declining fundraising and consolidation, which is particularly challenging for small and medium-sized funds, and raises concerns about the ability of startups in diverse fields to raise the capital they need.”

Published by Globes, Israel business news – en.globes.co.il – on September 10, 2025.

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