Israel’s venture slowdown lags due to ecosystem’s founder mentality


Abstract of israel map network, internet and global connection concept, Wire Frame 3D mesh polygonal network line, design sphere, dot and structure. Vector illustration eps 10. (Abstract of israel map network, internet and global connection concept, W
Image Credits: Thitima Thongkham (opens in a new window) / Getty Images

While the impact of macro market conditions on the global venture ecosystem has dominated headlines and conversations since February, it occurred to me a few weeks ago that I hadn’t heard anything about Israel. No huge layoff perils — but no eye-popping mega-rounds either. Was no news good news? I decided to find out.

In the first half of 2022, more than $9.1 billion was invested into startups in Israel, according to the IVC Research Center. This marks a notable drop from the $12.4 billion invested in H2 2021, and it’s also a 17% decline from H1 2021.

At the same time, though, the country minted 20 new unicorns, which is down from 26 in H1 2021 but up from 16 in H2 2021. Plus, according to layoff tracking site, there have only been 17 reported instances of startup layoffs this year.

So while the venture scene in Israel mirrors the same funding pullback as other geographies, it seems to be doing so with fewer negative outcomes. I spoke with a few investors on the ground to find the root of this disconnect, and they described a startup culture that’s vastly different from that of the U.S. — meaning the numbers make sense.

For one, all of the investors told TechCrunch that companies in Israel have traditionally been scrappier and used to working with less, so if it doesn’t seem like a good environment to raise in, many of them have the reserves to sit out this period of volatility.

“I think a lot of companies are sitting on a fair amount of capital,” Avi Eyal, a co-founder and managing partner at Entrée Capital, said. “From our perspective, on average, the companies in our fund have got somewhere around 20 months of cash.”

But local investors said that the main reason we aren’t hearing about Israel’s woes is as much about its startup culture as it is chutzpah — defined as extreme self-confidence — as one investor put it.

“Founders generally have the tendency to persevere,” Shelly Hod Moyal, a co-founder of iAngels, told TechCrunch. “This is of course generalizing, but we have seen this characteristic trait in Israeli entrepreneurs before, by avoiding giving up and closing a company. We haven’t come to the conclusion that it’s a good thing or a bad thing. They can go on and on and raise another round but that doesn’t necessarily lead to success of that product or entrepreneur.”

Dekel Persi, a co-founder and managing partner of TPY Capital, added that the Israeli market thinks about failure in a very different way than other startup ecosystems. He said that companies are much more conscious of their reputation, adding that if a startup was going to conduct layoffs, it likely wouldn’t announce it and would try to place employees into new roles if possible before making the cut.

“How they behave will impact their ability to hire talent or to raise the next capital — they are very conscious of their reputation,” Persi said.

Eyal added that this culture around failure also impacts how a founder or company rebounds. He said that while in the U.S. it’s normal for a founder to fail and bounce back relatively quickly — ahem, Adam Neumann — that isn’t really the case in Israel.

The market also isn’t as reactive. All the investors TechCrunch spoke to said that they think Israel will catch up with the broader slowdown in a quarter or two because its market generally lags behind. Startup layoffs in the country back that up, too. Of the 17 reported layoffs this year, all but four happened in June or later, compared to the U.S., when cuts started happening in February and March.

“That is generally a theme that applies to economics in Israel — let’s wait a quarter and see if this is a real thing or just a hiccup,” Eyal said. “Now I think there is a realization that it is a real thing and they are probably starting to act on it.”

While the future of where the market is headed isn’t clear, it will be interesting to see if waiting to react to the changing conditions works in the country’s favor or against it.

More TechCrunch

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

2 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

2 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?

Strava announced a slew of features, including AI to weed out leaderboard cheats, a new ‘family’ subscription plan, dark mode and more.

Strava taps AI to weed out leaderboard cheats, unveils ‘family’ plan, dark mode and more

We all fall down sometimes. Astronauts are no exception. You need to be in peak physical condition for space travel, but bulky space suits and lower gravity levels can be…

Astronauts fall over. Robotic limbs can help them back up.

Microsoft will launch its custom Cobalt 100 chips to customers as a public preview at its Build conference next week, TechCrunch has learned. In an analyst briefing ahead of Build,…

Microsoft’s custom Cobalt chips will come to Azure next week

What a wild week for transportation news! It was a smorgasbord of news that seemed to touch every sector and theme in transportation.

Tesla keeps cutting jobs and the feds probe Waymo