Israel’s tech industry is facing a challenging crisis, resulting in reduced investments, layoffs, the decline of fast-growing startups, benefit cuts, and more. This crisis originated with the global economic downturn due to rising inflation, and has persisted even as other countries show signs of recovery. Early-stage startups have been particularly impacted, facing difficulties in establishing new companies and securing funding.
A key aspect of this crisis is the significant drop in the number of angel investors in Israel, as reported by Startup Nation Central. In 2023, there were only 61 active angel investors, compared to 251 in 2022, marking a decline of over 75%. This trend is a stark contrast to the nearly 300 angel investors who were active in 2021, showcasing an almost 80% decrease over the past two years.
Angel investors, also known as private investors, typically invest their own capital in early-stage companies, often in exchange for equity and future profits. Despite legislative efforts to attract angel investors to Israeli companies, such as the “Angels Law” approved in July 2023, the decline in their numbers persists. The law offers tax credits to private investors who support early-stage startups, aiming to encourage strategic investment in the tech market, but the results have not been as expected.
The Israeli angel investors community includes notable figures like Zohar Gillon and Yossi Vardi, who have made significant investments in various ventures. In recent years, a new generation of angel investors has emerged, including entrepreneurs who have found success in their own companies and are now investing their capital in startups.
In a global context, angel investors like Peter Thiel, Mark Anderson, and Tim Draper play a crucial role in supporting early-stage companies. However, the landscape of angel investing is evolving, with a shift towards venture capital funds taking on a more prominent role in funding startup ventures.
Despite the challenges facing angel investors in Israel, their value in the investment ecosystem remains significant. Factors such as the global tech crisis, internal political issues, and ongoing conflicts impact the decision-making of angel investors. While uncertainty prevails, the role of angel investors in supporting innovative startups continues to be vital, albeit in a changing investment landscape.
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