We are excited to share with you our review of Q2 2022 in the Israeli Tech Ecosystem.
Greenfield Partners extends its congratulations to the 106 companies that raised capital this quarter, totaling $4.5 billion in funding.
Additionally, we join the ecosystem in welcoming Israel’s 7 newest unicorns: Monte Carlo, Optibus, Perimeter 81,StarkWare, Unit, Vayyar, and Viz.ai
State of the Israeli Venture Market
Initial signs of downturn seeping into the venture market
Meaningful slowdown in financing activity: -28% QoQ and -36% YoY
Trend likely to be amplified in the quarters ahead as capital raised is a trailing indicator and many deals announced this quarter were likely priced in Q1 or earlier
Focus on burn multiple and extending cash runway
We are seeing increased scrutiny of cash burn in efforts to extend cash runway. Companies are aiming to achieve cash runway of at least 18-24 months and a minimum of 9-12 months before kicking off any fundraising process
Alternative methods of financing
In lieu of traditional equity financing, we are starting to see more openness to alternative methods of financing such as convertible notes and SAFEs in later rounds. Companies are also considering round extensions in order to bolster cash positions
Reassessment of Budgets and Scenario Planning
Budgets are being reassessed and focus is being shifted from growth to efficiency and free cash flow. Companies are building out multi-scenario budgets that can help manage cash outflows given different levels of growth and spend
We can see early signs of the current downturn as financing activity slows down across both early-stage and late-stage venture rounds
With no indication of a near-term bottom, investors opt to cut back the pace of new investments and spend more time with current portfolio
Q2 2022 Breakdown - By the Numbers
Health-tech and Cybersecurity proved to be the most heavily invested sectors in q2, with Fintech and Crypto noticeably missing from the Top 5
Public SaaS Comps and Macroeconomic Indicators
Stronger correlation between rule of 40 and rev. Multiple implies that in the current market efficiency is higher valued than growth
Valuation multiples have seen a deep correction from their 2021 highs and are currently trading below their trailing averages
Growth-adjusted multiples are trading closer to trailing average, suggesting part of the drop is related to lower growth, as well as that there may be further room to go to reach bottom
Global supply chain crisis, global conflict, unprecedented levels of inflation, and rising interest rates, are all factors of the current market downturn
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