Venture capital in Israel refers to the

financial capital Financial capital (also simply known as capital or equity in finance, accounting and economics) is any Economic resources, economic resource measured in terms of money used by entrepreneurs and businesses to buy what they need to make their prod ...

provided to early-stage, high-potential, high risk, growth

startup companies A startup or start-up is a company or project undertaken by an Entrepreneurship, entrepreneur to seek, develop, and validate a scalable business model. While entrepreneurship includes all new businesses including self-employment and businesses tha ...

based in

Israel Israel, officially the State of Israel, is a country in West Asia. It Borders of Israel, shares borders with Lebanon to the north, Syria to the north-east, Jordan to the east, Egypt to the south-west, and the Mediterranean Sea to the west. Isr ...

. The country's

venture capital Venture capital (VC) is a form of private equity financing provided by firms or funds to start-up company, startup, early-stage, and emerging companies, that have been deemed to have high growth potential or that have demonstrated high growth in ...

industry was born in the mid-1980s and has rapidly developed. Israel currently has more than 276 active venture capital funds, of which 71 are international VCs with Israeli offices. Israel's venture capital and incubator industry plays an important role in the booming high-tech sector that has been given the nickname "

Silicon Wadi Silicon Wadi (, ) is a region in Israel that serves as one of the global centres for High tech, advanced technology. It spans the Israeli coastal plain, and is cited as among the reasons why, for some, the country has become known as the world ...

", considered second in importance only to its Californian counterpart, the

Silicon Valley Silicon Valley is a region in Northern California that is a global center for high technology and innovation. Located in the southern part of the San Francisco Bay Area, it corresponds roughly to the geographical area of the Santa Clara Valley ...

. According to the Israeli Research Center,

IVC IVC can refer to: Places * Invercargill Airport, New Zealand, IATA code * Ivory Coast, UNDP country code * Oflag IV-C, a German World War II prisoner-of-war camp in Colditz Castle Education * Impington Village College * Irvine Valley College ...

, Israeli tech exits in 2021 ( M&As,

buyout In finance, a buyout is an investment transaction by which the ownership equity, or a controlling interest of a company, or a majority share of the capital stock of the company is acquired. The acquirer thereby "buys out" the present equity holde ...

s, IPOs) totaled $22.2 billion from 238 deals. Excluding deals over $5 billion, 2021 capital saw almost 50% from IPOs, while the number of M&As did not fall short compared to previous years. According to a report from Start-Up Nation Central (SNC), the three largest earning sectors in Israel were Enterprise IT & Data Infrastructure (which raised just under $6b), Cybersecurity-dominated Security Technologies ($5.9b), and Fintech ($4.2b). According to IVC, In 2021, venture capital investment in Israel stood at $25.6 billion – a leap of almost 150% from 2020.

History

Israel's

industry was born in 1985, when the first Israeli venture capital fund, Shlomo Klahr Athena Venture Partners, was founded by Major-General Dan Tolkowsky, the past Chief of Staff of the Israel Air Force; Dr. Gideon Tolkowsky; and Frederick R. Adler, a pillar of the US venture capital industry who had conceived the notion of taking Israeli High-tech companies public on NASDAQ. Subsequently, in 1990, Gideon Tolkowsky and Yadin Kaufmann founded Israel's second VC firm, "Veritas Venture Capital Management", whose main investors were Anglo American Corporation of South Africa and De Beers. The success of the venture capital industry in Israel continued with Yozma (Hebrew for "initiative"), a government initiative in 1993 offering attractive tax incentives to foreign venture capital investments in Israel and promising to double any investment with funds from the government. As a result of their efforts, Israel's annual venture capital outlays rose nearly 60-fold, from $58 million to $3.3 billion, between 1991 and 2000. The number of companies launched using Israeli venture funds rose from 100 to 800. Israel's information technology revenues rose from $1.6 billion to $12.5 billion. By 1999, Israel ranked second only to the United States in invested private equity capital as a share of GDP. It also led the world in the share of its growth attributable to high-tech ventures: 70 percent. According to the

OECD The Organisation for Economic Co-operation and Development (OECD; , OCDE) is an international organization, intergovernmental organization with 38 member countries, founded in 1961 to stimulate economic progress and international trade, wor ...

, Israel is also ranked first in the world in expenditure on

Research and Development Research and development (R&D or R+D), known in some countries as OKB, experiment and design, is the set of innovative activities undertaken by corporations or governments in developing new services or products. R&D constitutes the first stage ...

(R&D) as a percentage of GDP. Though Israel's venture capital industry played an important role in the high-tech sector, the

2008 financial crisis The 2008 financial crisis, also known as the global financial crisis (GFC), was a major worldwide financial crisis centered in the United States. The causes of the 2008 crisis included excessive speculation on housing values by both homeowners ...

also affected the availability of venture capital locally. In 2009, there were 63

mergers and acquisitions Mergers and acquisitions (M&A) are business transactions in which the ownership of a company, business organization, or one of their operating units is transferred to or consolidated with another entity. They may happen through direct absorpt ...

in the Israeli market worth a total of $2.54 billion; 7% below 2008 levels ($2.74 billion), when 82 Israeli companies were merged or acquired, and 33% lower than 2007 proceeds ($3.79 billion) when 87 Israeli companies were merged or acquired. In 2019, Israeli companies were considered more popular than their American peers. For comparison, investment volume in Israeli startups grew by 140% from 2014 to 2018. Investments in technological startups from the U.S. grew by 64%. Moreover, Israeli startups are becoming so attractive that US companies tend to acquire them more than anyone else: they account for half of all transactions in 2018. Thus, Israel eventually became a "net seller". In particular,

artificial intelligence Artificial intelligence (AI) is the capability of computer, computational systems to perform tasks typically associated with human intelligence, such as learning, reasoning, problem-solving, perception, and decision-making. It is a field of re ...

(AI) raises the most investments (17%) among all high technologies in Israel. The recent acquisition of Israeli company

Mellanox Mellanox Technologies Ltd. () was an Israeli-American multinational supplier of computer networking products based on InfiniBand and Ethernet technology. Mellanox offered adapters, switches, software, cables and silicon for markets including high ...

for $6.9 billion by Nvidia Corporation is indicative. It was a definite contender for the largest M&A deal in 2019.

Characterization

Israel's venture capital industry has about 276 active venture capital funds, of which 71 are international VCs with Israeli offices. Additionally, there are some 220 international funds, including Polaris Venture Partners,

Accel Partners Accel, formerly known as Accel Partners, is a global venture capital firm. Accel works with startups in seed, early and growth-stage investments. The company has offices in Palo Alto, California and San Francisco, California, with additional ope ...

, and

Greylock Partners Greylock Partners is one of the oldest venture capital firms, founded in 1965, with committed capital of over $3.5 billion under management. The firm focuses on early-stage companies in consumer and enterprise software. History Greylock wa ...

, that do not have branches in Israel but actively invest in Israel through an in-house specialist. In 2009, the

Life Sciences This list of life sciences comprises the branches of science that involve the scientific study of life – such as microorganisms, plants, and animals including human beings. This science is one of the two major branches of natural science, ...

Sector led the market with $272 million or 24% of total capital raised, followed by the

Software Software consists of computer programs that instruct the Execution (computing), execution of a computer. Software also includes design documents and specifications. The history of software is closely tied to the development of digital comput ...

Sector with $258 million or 23%, the

Communications Communication is commonly defined as the transmission of information. Its precise definition is disputed and there are disagreements about whether Intention, unintentional or failed transmissions are included and whether communication not onl ...

sector with $219 million or 20%, and the

Internet The Internet (or internet) is the Global network, global system of interconnected computer networks that uses the Internet protocol suite (TCP/IP) to communicate between networks and devices. It is a internetworking, network of networks ...

sector with 13% of capital raised in 2009.

The unicorns era

Venture capitalist Aileen Lee coined the term "unicorn" in 2013 to define a privately held startup valued at $1 billion or more. It was initially used to portray the rarity of such companies. As of 2021, over 70 unicorns exist in Israel or were founded by Israelis – making Israel the number one country in the world in its number of unicorns per capita. The first Israeli company to be named a unicorn was ironSource, reaching a value of $1.5 billion in 2014. Since then the rate of new Israeli unicorns has risen exponentially. From 2014 to 2018, the total number of new unicorns was 19 combined; 2019 had 12 new unicorns, and in 2020 a total of 14, whereas in 2021, there were an astonishing number of 28 companies, including Wiz, K-health, Verbit, Deel and Honey Book, a 200% increase compared to the previous year. As a result, more foreign venture capital funds are currently invested in Israeli or Israeli-led unicorns, including

Andreessen Horowitz AH Capital Management, LLC (commonly known as Andreessen Horowitz, or a16z) is an American privately held venture capital firm, founded in 2009 by Marc Andreessen and Ben Horowitz. The company is headquartered in Menlo Park, California. As of M ...

, Spark Capital, Vertex Ventures,

Insight Partners Insight Venture Management, LLC (commonly referred to as Insight Partners and previously Insight Venture Partners) is a global venture capital and private equity firm that invests in high-growth technology, software, and internet businesses. The ...

and corporate venture capital funds including

Intel Capital Intel Capital Corporation started off as the investment arm of Intel Corporation in 1991 and in January 2025, it spun off as a standalone investment fund. Intel Capital makes equity investments in a range of technology startups and companies off ...

, Microsoft Ventures (M12) and others.

Technological business incubators

In the early 1990s, the Israeli government created a technological

business incubator A business incubator is an organization that helps startup companies and individual entrepreneurs to develop their businesses by providing a fullscale range of services, starting with management training and office space, and ending with venture ...

program (Hebrew: חממה טכנולוגית) to leverage the strengths of approximately 750,000 scientists, engineers, and physicians who had just arrived from the former

USSR The Union of Soviet Socialist Republics. (USSR), commonly known as the Soviet Union, was a List of former transcontinental countries#Since 1700, transcontinental country that spanned much of Eurasia from 1922 until Dissolution of the Soviet ...

. Israel's Office of the Chief Scientist (OCS), a division of the Ministry of Economy, started six incubators designed to foster seed and early-stage technology development through

entrepreneurship Entrepreneurship is the creation or extraction of economic value in ways that generally entail beyond the minimal amount of risk (assumed by a traditional business), and potentially involving values besides simply economic ones. An entrepreneu ...

. Today, there are 24 such incubators located throughout Israel, and 65 percent of the projects are science-related research and development. In 2007, incubator companies raised $435 million in private funds, up 74 percent from 2006. Currently, the OCS allocates approximately $1 billion per year to incubators and other programs that encourage technology developmentIsrael's High-Tech Boom
The Jewish Policy Center, Summer 2008

List of VC companies in Israel

* Pitango Venture Capital *

Genesis Partners Genesis Partners is an Israeli venture capital firm, founded in 1996 by Eddy Shalev and Eyal Kishon. Overview Genesis Partners investment strategy is focused on early-stage Israeli innovation-driven technology companies. The company invests in ...

OurCrowd OurCrowd is an online global venture investing platform that empowers institutions and individual accredited investors to invest and engage in emerging technology companies at an early stage while still privately held. Based in Jerusalem, the com ...

Vertex Holdings Vertex Venture Holdings, also known as Vertex Holdings, is an investment holding company based in Singapore with a group of venture capital funds worldwide. A subsidiary of Temasek Holdings, the company focuses on venture capital investment opp ...

* Hanaco Ventures

References

External links

Directory of venture capital funds in Israel

at MFA.gov.il
Full list of Israeli unicorns
in Tech Aviv Project {{Economy of Israel Finance in Israel Science and technology in Israel Venture capital *