Pre-Seed investments, the first crucial injection of capital in a startup’s journey, have surged in Israel over the past year as venture capitalists and angel investors ramp up their activity. According to Fusion’s annual Pre-Seed Investment Report, the number of early-stage investments by angels has doubled, driven in part by the stabilization of the war. However, investors are also changing their approach, increasingly demanding more than just an idea and a pitch deck before committing funds.
The report, which maps pre-Seed funding rounds of up to $1.5 million, draws on data from 51 active angel investors, 40 VC funds, and Fusion’s proprietary insights from nearly 1,100 Israeli startups. The findings reveal that half of all pre-Seed rounds fall between $825,000 and $1.5 million, with startups securing median valuation caps of $6 million or more. The median round size is $825,000, with $750,000 typically coming from VCs and $75,000 from angel investors.
Stricter Investment Criteria and Changing Valuations
Despite increasing stability in both global and Israeli markets, pre-Seed valuations have remained relatively stable, with 63% of VCs and 50% of angels reporting no major shifts from last year. However, 31% of VCs and 38% of angels stated they invested at lower valuation caps than in 2023, indicating a more cautious approach.
Investor expectations have also evolved significantly. Fusion’s report highlights that fewer investors are willing to fund startups at the idea stage. While in 2023, 29% of angels and 46% of VCs backed concept-stage ventures, in 2024, only 24% of angels and 15% of VCs are willing to do so, preferring startups with a working product, pilot programs, or initial users. “Investors today expect founders to demonstrate product maturity, team execution, and market validation before committing capital,” said Amit Shechter, Head of Fusion’s Investment Team.
Angels Step Up as VCs Change Approach
Angel investors have dramatically increased their involvement. The number of angels making more than five investments quadrupled from 8% last year to 32% in 2024, and 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. Instead, some funds are opting to co-invest alongside leading VCs to build early relationships with promising startups.
Conversely, angel investment strategies have shifted in the opposite direction. In 2023, 72% of pre-Seed rounds included 3-4 angels, but this has dropped sharply to 45% in 2024, with more rounds now featuring just 1-2 angels.
AI Dominates, But Not Everyone is on Board
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 avoided AI startups entirely, citing concerns over market saturation and fierce competition. Deep-tech AI investments remain niche, with only 10% of investors expressing interest beyond application-layer solutions.
The Rise of SAFE Agreements
The report also underscores a shift in how deals are structured. More pre-Seed rounds are being executed via SAFE (Simple Agreement for Future Equity) notes, which allow startups to raise funds without setting an immediate valuation. In 2024, 51% of VC-led pre-Seed rounds were structured as SAFEs, up from 42% last year, highlighting a move away from traditional equity financing.
According to Fusion’s founding partner Yair Vardi, this approach benefits early-stage founders. “Unlike serial entrepreneurs who can raise millions right away, pre-Seed founders need to grow incrementally. We encourage them to start small, secure early customers, and raise additional capital gradually,” Vardi said.
