Tower Semiconductor is seen on smartphone in front of displayed Intel logo in this illustration taken, February 15, 2022. REUTERS/Dado Ruvic/Illustration/

Israeli high-tech start-up firms raised $9.8 billion in the first half of 2022, almost a third less than in the previous half amid signs of global slowdown, a report by research group IVC and Bank Leumi’s LeumiTech arm said on Wednesday.

Separately, the government’s innovation institute and an independent tech policy group warned of layoffs in the tech sector, which is a key driver of economic growth, accounting for 10% of jobs in Israel and about 15% of economic activity, largely exports.

In 2021 tech companies raised a record $26 billion. The IVC/LeumiTech report showed a steep decline in mega-deals valued at more than $100 million, although early-round financing remained strong.

“The first six months of 2022 found Israeli tech at an inflection point between overhyped valuations and the high possibility of global economic depression,” IVC Chief Executive Guy Holzman said.

“It still remains to be seen how the current situation will affect the early stage start-ups in the following months.”

During the first half there were 66 exits, 56 of them through mergers and acquisitions, including the $5.4 billion purchase of Tower Semiconductor by Intel in February.

LeumiTech CEO Timor Arbel-Sadras said funding below $50 million remains stable. “This figure proves that there are good companies that manage to continue raising money according to their real value,” she said.

“Demand for technological products continues to be stable in all sectors.”

The private Start-Up Nation Policy Institute together with the state’s Israel Innovation Authority said in a report that employment in high-tech grew 12.1% in 2021, but in recent weeks smaller tech firms have started to lay off workers.

“We are definitely going to see a rise in layoffs,” the policy institute’s CEO Uri Gabai told Reuters. “But this all boils down to what’s going to happen in the US economy.”

“If it’s going to be a long recession, we’re going to see at some point a decline in investment in the Israeli high tech. This will obviously translate into the human capital side.”