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We are excited to share with you our review of Q3 2022 in the Israeli Tech Ecosystem.
Greenfield Partners extends its congratulations to the 85 companies that raised capital this quarter, totaling $2.58 billion in funding.
State of the Israeli Venture Market
Major Correction in Public Markets, In Particular Growth Tech
Growth tech has seen a more significant decline than the broader indexes. Causes include interest rate impact on valuation frameworks, funds flows out of public equities, economic challenges (supply chains, Ukraine, recessionary fears, etc.), and market sentiment
Decline in Venture Market Broadens
Venture market driven by same primary drivers as public markets, but in a more pronounced manner. Since the asset class is not traded, there is no immediate pricing indication to quantify the effect, but the bid/ask spread is significant, as evidenced by the sharp decline in dealmaking, and in all likelihood the asks will likely have to converge towards the bids
Doubling Down on Efficiency
Continued focus on unit economics while efficiency is being prioritized earlier on given market sentiment towards improving them at scale
Scenario Planning for 2023
Many dominos need to remain upright for a soft landing and smooth 2023, e.g., interest rates, labor market, oil prices, Ukraine, supply chain, real estate, inflation, etc. Companies are planning and preparing for a scenario of a deeper recession in 2023
Downturn Broadens with a 43% decline in capital raised QoQ. Growth Rounds Hit Harder vs. Early Venture Rounds which continue to Close
First Capital in Continues to flow while Later Stage Investors opt to focus on Current Portfolio, rather than New Investments
Q3 Breakdown - By the Numbers
Cloud / DevOps, Cybersecurity, and Data / AI / ML Account for Nearly 50% of both Capital Raised and Deals Closed this Quarter
PUBLIC SAAS COMPS AND MACROECONOMIC INDICATORS
Valuation Multiples continue to trade below their Trailing Averages with no clear indication of a near term Bottom
Widespread Budget Reassessment with continued emphasis on Efficiency over Growth
Growth-adjusted Multiples continue to Trade 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 before reaching the Bottom
The Fed is seeking to raise Interest Rates enough to curb Inflation without causing a Recession, a so-called Soft Landing. Risk is if Demand falls too low, Production Cuts and Layoffs could follow, pushing the Economy into a Recession
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