The 50 most promising Israeli startups - 2022

The high-tech market has cooled off, so in this year’s list of the 50 most promising Israeli startups we placed a special focus not only on growth and innovative ideas, but also on business models, actual revenue and the ability to realize potential

Meir Orbach and Sophie Shulman

13:52, 04.05.22

Over $25 billion was raised by Israeli startups in 2021, an almost unimaginable magnitude of investments. Just three years earlier in 2018, investments reached $6.5 billion in what was at the time considered to be a record year. The incredible influx of funds into local high-tech correlated with the dramatic entrance of venture capital giants like Insight Partners, Tiger Global and SoftBank and resulted in dozens of new Israeli unicorns (companies valued at over $1 billion) in 2021.

Last year’s list included numerous excellent companies, but also young companies that had only been around for 2-3 years, had annual revenue of several millions at best but had already raised hundreds of millions at ludicrous valuations. Companies that had only just been founded raised tens of millions in Seed funding rounds, while others rented out entire buildings as office space in order to display their strength. The competition for employees became so extreme that companies spent massively on billboard advertising and grandiose parties abroad. It seemed as if the traditional approach of the local market, one which believes in frugality, modesty and an ability to quickly build a sustainable business model was no longer relevant. Everyone knew that the funding paradise couldn’t last forever, yet Israeli high-tech was still euphoric.

This resulted, among other things, in a mental chasm between the industry and Israeli society. While in the past success stories of local tech companies were immediately adopted as a success for the entire country, for example with M-Systems, Check Point, Waze and Mobileye, today’s success stories also angered some sections of the public who feel that they aren’t benefiting from the good times. There’s no doubt that tech’s success generated huge sums in taxes and brought billions of dollars into the economy, strengthening the dollar and limiting the effects of the Covid-19 crisis on Israel. However, the public instead focused on the huge salaries being paid to tech employees, the chef restaurants opening at their office complexes, the luxurious parties and the rise in the cost of living supported by the cheap money. One of the indications of this sentiment could be seen in the public objection to any government benefit provided to the tech sector, even if it made complete sense.

This year got off to a far more pessimistic start, initially showcased in the continuous drop in the valuations of public tech companies, the cooling of the IPO market and the near disappearance of the SPAC trend. If in 2021 companies boasted about being valued higher than Check Point, now they are valued exactly as a young startup which is only being kept alive by its huge cash reserve should be. Most of the companies that went public over the past two years are currently being traded at about half their original value, with entrepreneurs who were on course to go public discovering that investors are far less keen to get involved, forcing them to cut their company valuations. Additionally, share options lost their luster as a tool to attract employees.

This relative winter also arrived in the private market, with quite a few startups struggling to raise funds, the valuation they are aiming for becoming debatable, and those who have cash in the coffers choosing to avoid additional rounds until the sentiment changes. Companies which postponed their funding rounds to 2022 discovered that investors are suddenly insisting on strange requests like significant revenue and a timeline to reach profitability, which combined together provide proof of a business model.

There is of course no need to eulogize local tech, with massive sums still flowing into the industry, in particular in popular sectors like cybersecurity and fintech. But the coming year, with a backdrop of a global recession and struggling stock markets, will be a testing year for Israeli startups. Are they crisis resistant and did they prepare for tougher times, or will they have to initiate cutbacks and in some cases even shut down.

That is why when we put together Calcalist’s list of Israel’s 50 most promising startups we assessed not only if the growth is impressive and the idea is brilliant, but also, and mainly, do these companies have a sustainable business model. We looked, and found, companies that aren’t relient just on the money of investors and technological hype, but are capable already today, or in the near future, to sustain themselves on real revenue. We verified that they are active in a market in which they have an advantage, but that they are also at a business stage which will allow them to realize this advantage and not collapse beforehand. The final list is an optimistic one and includes 50 excellent companies that we believe will continue to flourish in a big way, even if they might encounter some struggles in the near future.