BDO US & Israel Desk - Q4 Report

This has not been a smooth year for international markets to say the least, we’ve seen that American and Israeli businesses were hardly immune to the effects of increasing interest rates, with high inflation, the end of fiscal stimulus, as well as weak export markets all contributing to weighing down their respective economies. According to the latest Bloomberg monthly survey of economists, 7-in-10 believe there is a high likelihood that the US economy will sink into a recession in 2023, leading many to reduce their demand forecasts and cut their inflation projections in the wake of massive interest-rate hikes by the Federal Reserve. Normally the bellwether, technology companies were hit particularly hard in 2022, with investment rounds shrinking and layoffs affecting even the likes of Meta, Amazon, Intel and Twitter. On the other side of the Atlantic, during the first 3 quarters of the year Israeli high-tech companies raised over $12 billion in 530 deals, a sharp dip compared with the previous year's record breaking figures.

The numbers for 2022 show two things clearly, the first is the deep extent of the investment slowdown in almost all parts of the tech economy, the second is that early-stage technology companies are still able to raise capital at smaller valuations and substantially more modest rounds. In early December, more proof of this widespread economic slowdown led Isracard,Israel’s largest credit card company, to embark on a plan to streamline costs and operations by announcing that it was laying off 250 employees, approximately 12% of its workforce. Looking forward, with an economic recession looming on the horizon, we expect manufacturers will be particularly affected by lower investment and weak household spending heading into 2023. It is important for the Venture Market players to be tuned in to the changing winds. Some will affect valuations, others may effect the trends. We already know that the year to come is going to be a different show and that leverages the necessity of sharpening the market instincts and expanding the network connectivity to be exposed to as many opportunities that could be out there so the train is not missed.

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