A recent report by Fusion VC analyzing Israeli startups revealed that out of the 900 new companies established in Israel in 2023, 80% chose to incorporate in the US, specifically in Delaware. This decision was influenced by the political and security instability in Israel over the past year.
The survey focused on investments in pre-seed rounds in 2023 and 2024, showing that since the start of the conflict, 56% of leading angel investors in Israel and 55% of investment funds halted pre-seed investments in the final quarter of 2023.
Pre-seed investments are the initial funding provided to entrepreneurs, typically not exceeding $1.5 million, according to Fusion’s definition.
The report gathered data on initial investments in startups from 54 active angel investors involved in 190 deals, as well as 31 funds specializing in seed and pre-seed rounds with information on 110 deals. Fusion also tracked activities of over 900 Israeli entrepreneurs in the pre-seed stage.
Fusion’s investment team associate, Amit Shechter, who led the report, stated that documenting pre-seed deals is challenging due to their small scale and lack of media coverage. The report highlighted a decline in both the number of deals and the amounts raised.
One key finding was that around 80% of deals in the US were conducted using the SAFE investment mechanism, where the company’s valuation is determined later on.
Shechter emphasized the importance of entrepreneurs raising initial rounds in smaller amounts from strategic investors to build the company in a sustainable manner. The recommendation is for companies to remain lean with a limited team and resources to achieve a proof of feasibility.
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Fusion VC, founded in 2017 by Guy Katsovich and Yair Vardi, has invested in 110 startups across 13 cohorts, including Agora, Hoopo, Innplay Labs, Base.ai, and DigitalOwl.
Published by Globes, Israel business news – en.globes.co.il – on March 7, 2024.
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