The Boom in Israeli Pre-Seed Investments: What Founders Need to Know

Overview of Pre-Seed Investment Surge

Pre-Seed investments are witnessing a remarkable surge in Israel over the past year, with venture capitalists and angel investors significantly increasing their activity. According to Fusion’s annual Pre-Seed Investment Report, the number of early-stage investments by angels has doubled, largely influenced by the stabilization of the war in the region. However, investors are now demanding more than just a concept and a pitch deck before they commit funds.

Key Investment Insights

The report outlines pre-Seed funding rounds of up to $1.5 million, based on data from 51 active angel investors, 40 VC funds, and insights from nearly 1,100 Israeli startups. Key findings include:

• Half of all pre-Seed rounds are between $825,000 and $1.5 million, with median valuation caps exceeding $6 million.
• The median round size is $825,000, typically consisting of $750,000 from VCs and $75,000 from angels.

(Photo: Rotem Rogowski)

Stricter Investment Criteria

Despite a rise in stability within both global and Israeli markets, pre-Seed valuations have remained mostly stable. 63% of VCs and 50% of angels reported no significant changes from last year. However, 31% of VCs and 38% of angels indicated they invested at lower valuation caps, showcasing a more cautious investment approach.

Evolving Investor Expectations

Investor expectations have significantly shifted. The report highlights a decline in willingness to fund startups at the idea stage. In 2023, 29% of angels and 46% of VCs backed concept-stage ventures, whereas in 2024, only 24% of angels and 15% of VCs are inclined to do so, favoring startups that exhibit a working product, pilot programs, or initial users. According to Amit Shechter, Head of Fusion’s Investment Team, “Investors today expect founders to demonstrate product maturity, team execution, and market validation before committing capital.”

Angel Investors on the Rise

Angel investors have dramatically increased their involvement, with the percentage of angels making more than five investments quadrupling from 8% to 32% in 2024. Those making more than eight investments doubled to 10%. Meanwhile, VCs are becoming more flexible, with fewer funds insisting on leading rounds—down from 55% in 2023 to 48% in 2024.

Conversely, the number of pre-Seed rounds featuring 3-4 angels has dropped sharply from 72% in 2023 to 45% in 2024, indicating a trend towards fewer angels participating in funding rounds.

AI's Dominance in Investment

Artificial intelligence continues to dominate pre-Seed investments, with 78% of VCs and 63% of angels reporting multiple AI-related deals. However, 20% of investors are avoiding AI startups due to concerns over market saturation and fierce competition. Deep-tech AI investments remain a niche focus, with only 10% of investors showing interest beyond application-layer solutions.

The Shift Towards SAFE Agreements

The report also reveals a shift in deal structuring, with more pre-Seed rounds executed via SAFE (Simple Agreement for Future Equity) notes. In 2024, 51% of VC-led pre-Seed rounds were structured as SAFEs, up from 42% last year, marking a move away from traditional equity financing. According to Yair Vardi, a founding partner at Fusion, this approach benefits early-stage founders who need to grow incrementally rather than securing large sums upfront.