NEWSLETTER
Israeli cybersecurity The industry, like the global one, has been undergoing an evolution that seemed to peak in 2021 with rising funding rounds, overwhelming valuations, and multiple newly minted unicorns, only to cool dramatically amid the 2022 market slowdown with sharp declines and frozen growth. rounds. The dizzying speed of these fluctuations caused ramifications that reverberated throughout the industry throughout 2023, as Israeli cybersecurity startups had to adapt and find their place in this new post-boom funding reality.
Every year, YL Ventures monitors, analyzes and publishes data on financing and acquisitions in the Israeli cybersecurity market, with insights from industry luminaries to illuminate trends and changes in this fiercely competitive and relentlessly pioneering industry. In 2023, despite the decline in overall fundraising, we can identify trends that indicate a positive trajectory for the industry, including an increase in exits. These trends are evident in the continued investment in promising cybersecurity startups and the determination of skilled and experienced entrepreneurs to find and address the most acute and urgent security issues plaguing today's business world.
Image credits: YL Ventures
Beyond the general macro aspects, specifically in the cyber space, the predominant explanation for this downward trajectory is a continuation of market corrections following the strong increases of 2021. Towards the end of 2023, Israel was facing national, economic and geopolitical. The ongoing war between Israel and Hamas has impacted the Israeli tech sector in much the same way as the rest of Israeli society, but its resilience and determination form the foundation for further growth, stability and longevity despite unprecedented challenges. There were several impressive funding rounds and acquisitions from Israeli cybersecurity startups in the last quarter of 2023, despite the circumstances, and the effects of these events will likely not be evident until the first half of 2024.
General funding in 2023
Image credits: YL Ventures
In 2023, the overall decline in technology investments continued, with total funding for Israeli cybersecurity startups reaching just $1.89 billion across 71 funding rounds, down 41% from the 2022 total of $3.22 billion. in 94 financing rounds. “In 2021, the irrational exuberance of financial markets led to inflated valuations across the startup landscape, including cyber,” he says. Erica Brescia, CEO of Redpoint Ventures. “What we are witnessing now is not a slowdown, but rather a return to pre-pandemic sanity: a market correction that paves the way for healthier startups.”
Early stage financing
Contrary to overall funding trends, there was a significant increase in the average seed round for the sixth consecutive year, from $9 million in 2022 to a record $9.8 million in 2023. This can be attributed to the continued and growing need for innovative security solutions to solve relentless security problems and a sustained investor appetite to support innovative founding teams capable of doing so. While the average number of seeds grew, the number of seed rounds in 2023 was only 36, down from 46 in 2022.
