Israel’s Tech Sector Thrives: Startup Nation Sees 78% Surge in Tech Exits

Amidst a year of unprecedented global challenges, Israel’s tech sector has held on to its mantle as the “Startup Nation” and delivered performance that far exceeds market expectations, with tech exits surging 78% to $13.4 billion in 2024, compared to $7.5 billion in 2023 according to PwC Israel. But is the Startup Nation an exception? Or simply a part of a larger global recovery that is starting to pay dividends for investors? 

The Dynamic Landscape of Tech Exits in 2024

The technology sector in 2024, particularly AI-driven enterprises, has experienced a transformative wave of exits. Fueled by unprecedented demand for AI solutions and strategic consolidation by industry leaders, the landscape is being reshaped by rapid exits, high-profile IPOs, and surging valuations. Below, we explore the key figures and trends defining this dynamic environment and the key players that have driven such significant results for the M&A market. 

Accelerated Exits in AI Startups

AI startups are exiting at an average of just 7 years from inception, significantly faster than the 13-year average for non-AI companies. This acceleration underscores the immense demand for AI solutions across industries. Major corporations such as Nvidia, Zendesk, and Salesforce have emerged as dominant players, leveraging acquisitions to stay competitive. For example, in 2024 alone, Nvidia has allocated over $10 billion to acquisitions, focusing on startups that enhance its AI and machine learning capabilities.

Record-Breaking IPOs and Strategic Exits

This year has witnessed several successful tech IPOs that reflect the sector’s resilience. Reddit, a pioneer in social media integration with AI, went public in March at a valuation of $6.5 billion. Similarly, Astera Labs, specializing in AI and cloud infrastructure, debuted with an IPO valuation of $5.5 billion. These companies are capitalizing on the resurgence of the IPO market, which is particularly favorable for firms leveraging AI technologies. Economic pressures and rising interest rates have also prompted private late-stage companies to accelerate exit plans, shifting from venture capital reliance to public markets.

Surging Market Valuations in AI: A Win for Israel’s Tech Sector

The total valuation of AI-focused companies reached nearly $9 trillion in 2024, with public firms contributing significantly. This valuation surge reflects growing investor confidence in AI’s transformative potential. Within the generative AI niche, startups are achieving unprecedented valuations. For instance, Cognition, an AI software engineering platform, achieved a valuation of $2 billion just six months post-launch, illustrating the “gold rush” mentality among investors. Meanwhile, global funding for AI startups has surpassed $150 billion in 2024, a 30% increase from the previous year.

Israel’s Tech Economy

Israel’s tech ecosystem has long been celebrated for its innovation, resilience, and global influence. In 2024, the country’s tech industry has achieved remarkable milestones, defying the backdrop of war and economic uncertainty. According to PwC Israel, the value of Israeli tech exits—including mergers and acquisitions and IPOs—surged 78% year-over-year to $13.4 billion, up from $7.5 billion in 2023.

This achievement places 2024 as one of the strongest years for the sector over the past decade, despite the volatile conditions. While the number of deals increased modestly from 45 to 53, the average deal size jumped 51%, reaching $252 million. These figures underscore Israel’s ability to sustain high-value transactions, particularly in its core areas of strength—cybersecurity and artificial intelligence—while diversifying into sectors such as enterprise software, life sciences, and internet technologies.

A Thriving Landscape of Startups and Investment

Israel’s reputation as the “Startup Nation” stems from its dense network of innovative companies, groundbreaking technologies, and an entrepreneurial spirit. The country’s startups and tech firms have consistently attracted the attention of global investors and acquirers. In 2024, Israeli buyers completed 15 deals worth $3.2 billion. Notable deals included Nvidia’s acquisition of AI startups Deci for $300 million and Run:ai for $700 million, as well as Salesforce’s acquisitions of Own and Zoomin for $1.9 billion and $450 million, respectively.

These successes highlight a strong pipeline of innovation, bolstered by Israel’s renowned capabilities in cybersecurity and AI. With mega-deals, such as Blackstone acquiring Priority Software for $800 million and Johnson & Johnson’s purchase of V-Wave, Israel’s tech ecosystem remains a critical player in the global technology market.

The Paradox: Growth Amidst Crisis

While the data paints an optimistic picture, the circumstances surrounding these achievements are paradoxical. 2024 has been marked by one of the most challenging periods in world history. Geopolitical tensions, internal economic pressures, and the demands placed on the population during times of conflict could have stifled business operations and investment. Yet, the tech sector has managed to thrive.

Executives and employees of local startups have persevered, maintaining operations and innovating despite logistical challenges and personal sacrifices. Meanwhile, international macroeconomic conditions, coupled with Israel’s strong global reputation for technological excellence, have continued to drive investor interest.

“Against the backdrop of war and amid internal and global challenges, the Israeli high-tech industry demonstrates recovery signs in 2024, showing significant upward trends in both average deal size and total transaction values,” said Yaron Weizenbluth, partner at PwC Israel.

Factors Driving Resilience

Several key factors contribute to this success, including a strong focus on dominant industries, a collaborative global outlook, and a deeply ingrained entrepreneurial spirit. Together, these elements reinforce Israel’s position as a leader in technological innovation while fostering confidence within both local and international markets.

1. Sectoral Strengths: Cybersecurity and AI continue to dominate Israel’s tech landscape, driving persistent demand for innovative solutions even amidst uncertainty. Additionally, the sector has expanded its reach into new domains such as life sciences, further enhancing the resilience and diversity of the ecosystem.
2. Global Collaboration: Israeli startups remain a key focal point for international buyers, particularly from the US, who see them as integral to their strategic growth. This sustained interest has facilitated a steady flow of capital and business opportunities, reinforcing Israel’s position as a global leader in technology innovation.
3. Entrepreneurial Spirit: Israel’s strong entrepreneurial culture is a critical factor behind the resilience of its tech sector. This culture has instilled a sense of determination and adaptability, empowering companies to not only navigate challenges but also uncover new opportunities for growth and expansion.
4. Blue-and-White Transactions: Notably, 28% of all transactions in 2024 involved Israeli acquirers and targets, underscoring the confidence within the local market. These “blue-and-white” deals highlight the collaborative spirit among Israeli tech companies, further demonstrating the strength of the domestic ecosystem.

Looking Ahead

While 2024 has been a record year for exits, industry leaders emphasize the need for long-term planning to maintain momentum. Formulating a national strategy that invests in human resources, social cohesion, and equal civic participation could secure Israel’s competitive edge in the global tech market. 

Most market commentators, ourselves included, remain optimistic about the coming year and what it means for M&A volumes as companies start to deploy war chests to build strategic advantage in core capabilities such as AI.