Israeli seed-stage companies spearheading the next wave of fintech innovation
Like most sectors, a year of sustained global macroeconomic and geopolitical headwinds have undercut momentum in Israel’s renowned fintech ecosystem, for now. In the series of graphs and charts presented below, we’ve identified a set of key insights on trends in the Israeli fintech space, outlining the newest seed-stage fintechs that are on our radar, and a list of the most active fintech venture groups.
While overall investment in Israeli fintechs decreased between 2021 and 2022, the scale of investment made during the last 12 months still exceeds previous years’ records, reaching $2.72 billion spread across 123 deals.
Bruising times for post-seed companies
Relative to the previous year, post-seed companies – broadly speaking – had a more difficult time attracting investments over the course of 2022. Indeed, the amount invested in A & B rounds declined 38% between 2021 and 2022, while investments in C+ rounds declined by 70%.
The FOMO contagion that contributed to skyrocketing valuations in 2021 subsided significantly over the past year, as did the number of projects in fundraising mode with ‘half baked’ concepts. Last year’s market downturn forced investors to exercise more discretion and sharpen their focus on pure fundamentals, rather than succumbing to the prevailing herd mentality. However, irrespective of market conditions, the cream always rises to the top, and truly innovative companies with a clear path to profitability have had an easier time raising capital over the past twelve months. In contrast to early and late stage companies, seed-stage companies have attracted relatively consistent levels of investor interest over the past two years.
Resilience of seed companies on full display
While the total number of seed investments in 2022 is down, the median deal size actually increased – a positive indicator for Israeli seed-stage startups in fundraising mode. In fact, the median deal size has been on an upward trajectory for each year since 2020.
High-potential fintechs making waves
Undeterred by the global economic downturn, Israel’s seed-stage fintechs are innovating at pace, developing cutting-edge solutions that tie in with evolving market trends. Proprietary technology is being deployed across the industry spectrum, with fintech capabilities extending to verticals such as lending, global trade, risk & compliance, Web3, insurtech and capital markets.
Team8 is proud to have built and invested in companies at the forefront of this fintech revolution, including 40Seas, Ballerine and Wisor AI.
40Seas is an innovative fintech platform for cross-border trade financing, delivering a much more efficient, simplified, and cost-effective financing framework for SMEs involved in global commerce.
Ballerine offers open source KYC and risk management infrastructure that enables the underserved fintech and SME community to tap into the flexible KYC/KYB tools tailored to their particular customer base.
Wisor AI is an advanced freight booking software solution that automates both the cumbersome, manual process of aggregating pricing data provided by shipping companies as well as the optimization of shipping routes.
Leading players in Israel’s VC space
Israeli VCs have played an integral role in the growth of the country’s burgeoning fintech ecosystem, and we are proud to be a leading investor in the space – building and backing the companies at the forefront of fintech innovation on home soil. Our portfolio companies are delivering cutting-edge solutions across verticals such as taxtech, insurtech, global trade, as well as KYC and risk management.
But we’re not alone. Four out of the five investor groups listed below are Israeli, with ourselves, Viola, Phoenix and Aleph providing financial backing to a who’s who of fintech platforms over the course of 2022. Out of all the investments in fintech companies last year, Phoenix was the top strategic investor.
Exits and investments: What went down
Below is a useful overview of the top rounds and the most noteworthy mergers and acquisitions across Israel’s fintech landscape in 2022.
Amid a global macroeconomic reset, we liken the recent downturn for Israel’s fintech ecosystem to taking one step back in order to take two steps forward. With Israeli seed-stage startups still very much in vogue from an investor’s point of view, the innovation that has defined Israel’s ascent as a leading fintech hub looks set to endure in the long term.
Looking ahead
Amid a global macroeconomic reset, we liken the recent downturn for Israel’s fintech ecosystem to taking one step back in order to take two steps forward. With Israeli seed-stage startups still very much in vogue from an investor’s point of view, the innovation that has defined Israel’s ascent as a leading fintech hub looks set to endure in the long term.
Download the full infographic here.