The finest hour of the seed funding

The global financial crisis continues to impact the world, causing central banks to raise interest rates to combat inflation. The COVID-19 pandemic and the Russia-Ukraine war have also resulted in disruptions to shipping and supply chains, leading to shortages and changes in consumer behavior. 

This economic recession caused many investors to become more risk-averse, and as a result, the venture capital industry around the world faced a challenging financial landscape in 2022. For example, high-tech company investments fell by 40% in Silicon Valley, and the number of rounds decreased by around one-third.

Despite Israel’s reputation as a strong economy with a thriving start-up ecosystem and a large number of successful tech companies, it is not immune to the crisis and showed a similar trend in 2022. 

Israel was no exception to the remarkable activity in the global technology sector in 2021, with a historic USD 27 billion invested in Israeli tech start-ups. 2022 was less phenomenal, with the cumulative investment amount dropping to about USD 15 billion, but still marking the second-highest yearly investment amount in Israel’s history. The number of investment rounds decreased from 1,103 in 2021 to 826 in 2022.

The decline in high-tech investments in 2022 can be attributed to the financial market downturn, which is not unexpected. However, seed investments in Israeli start-ups – a high-risk asset class in tech – experienced a 22% increase compared to the previous year. This tendency is particularly surprising when considering the drop in the number of start-ups. The main reason for the increase in seed rounds was largely due to late-stage investors moving to earlier stages, as extremely high (and not always justifiable) valuations in later rounds after the prosperous 2021 made seed investments a priority. Supposedly, investing in seed-stage companies can provide venture capital investors with higher security during times of financial crisis. This is because seed companies typically have a longer runway to reach their anticipated exit event, affording more time for the crisis to abate and for valuations to improve. In addition, the average number of investors in early-stage rounds, particularly seed rounds, has increased notably in recent years, with the greatest rise observed in 2022.

Similarly, we, at ExitValley are witnessing a heightened interest in seed investments from our investor community, along with a rise in the number of companies in these stages, that are welcoming the public to become their shareholders.

ExitValley was founded in 2015 to address the gap in early-stage capital raising for start-ups. Back then, investing in the Israeli hi-tech industry was exclusively accessible to a very small group, mainly comprised of venture capital funds, incubators, and a handful of angels. On the other hand, a lot of exceptional technological companies were facing major fundraising challenges at the beginning of their journey. 

ExitValley enabled private start-ups to raise capital directly from the public through its online investment platform and today it is the leading equity-based crowd-investing platform in Israel: almost $70 million have been invested through ExitValley in over 100 Israeli start-up companies, across various industries and stages of growth. 

We are proud to say, that among the companies in ExitValley’s portfolio are a large number of technology companies that, since their fundraising rounds on the platform at an early stage, have reached the point where they have an impact in Israel and around the world, for example HeraMed – a medical company quoted on the Australian Stock Exchange, which has developed a pregnancy monitoring system that enables continuous home monitoring of the health of the fetus, enabling responses to the early identification of possible complications, and is now helping save the lives of moms and babies of Ukrainian women, affected by the Russia-Ukraine war; SolCold – an exciting climatech company that has developed  a  groundbreaking solution to global warming, through a nanotechnological material that cools as a result of exposure to sunlight, and is intended for a variety of uses ranging from housing to transportation; and XRHealth – the first company in the world to use VR systems as an approved rehabilitation medical product. XRHealth raised funds through the ExitValley platform at the concept stage, and today its technology is used by a variety of medical facilities around the world.

ExitValley currently offers three investment options that differ from each other in terms of the minimum investment amount, the maturity level of the fundraising companies, and, as a result, the level of investment risk and return potential, while developing several additional innovative investment products and constantly improving the technological components of the platform itself.

Contact person for ExitValley: Eden Pozin, Business Development Manager

*The information in this article is based on the statistical data, provided by Israel’s Start-Up Nation Policy Institute.