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Unlocking Growth in 2023

State of the Israeli B2C Ecosystem

Navigating challenges, expanding opportunities: Insights and trends from Israel's thriving consumer-facing industry. A comprehensive review of the B2C ecosystem's performance and future prospects.


Opening notes

From a branch of the startup nation that virtually didn't exist 15 years ago, through to the first seeds planted by gaming companies, to a thriving industry riding on the waves of rising digital consumption - the Israeli B2C industry is nothing short of a success story. Reaching roughly 30% of the tech industry today, B2C is no longer a foreign concept to Israeli entrepreneurs, product experts, marketeers and investors. In fact, it may be the industry that finds the right opportunities for growth even in a time of crisis.

I know it's not trivial to talk about opportunities during this period, but as the Disruption Nation - this is what we do best. In times when reality is perfect, we as Israelis often can't find the cracks through which to break in and do something different. Instead, we're are at our best when reality requires innovative and out of the box solutions. When we have to break the rules and re-build, we have the ability to bring the same creativity we put into our products and technologies to cracking efficiencies, org structure and financial models. As scarcity drives innovation, this challenging period might actually be an opportunity to shine.

So for this upcoming period, our challenges are around maintaining profitability and efficiency, while continuing to innovate and drive growth. But if there’s an industry that can work through this delicate balance, it's the Israeli B2C industry.

In this report, you'll find our perspective on the opportunities that lie ahead, across all verticals, and the knowledge and tools you and your companies will need to seize them. As a sworn optimist, I truly believe this global economic crisis will make all of us better, stronger and more resilient and, despite all of its challenges - it will be a moment of growth.

Adi Soffer Teeni, VP & GM Israel

Despite a turbulent year, Israeli consumer-first startups showcased strong resilience, both in growth and profitability.

US GDP growth returned to a positive outlook in 2022: 3.2% in Q3 and 2.9%
in Q4.

In Q4 ‘22, the number of people daily using Facebook, Instagram and WhatsApp was at its highest ever.


Non-VC backed companies have the opportunity to win market share

Read chapter →

Digital Health

We’re seeing more bootstrapped digital health brands emerge

Read chapter →

Entertainment and Media

Publishers are looking to optimize revenue from programmatic ads

Read chapter →

Consumer Tech

Product diversification and data-driven decision making is increasing

Read chapter →


AI and the metaverse are fueling the Israeli ecosystem with innovative ideas

Read chapter →


Challenging macroeconomic conditions have pushed the industry towards a more conservative marketing approach

Read chapter →

Self-Serve B2B SaaS

Primary KPIs are now customer acquisition cost and net dollar retention

Read chapter →

Unlocking the Creative Machine

A recent Meta survey found that top performing advertisers create 50-70 new ads a week

Read chapter →

Unlocking the Creators Economy

93% of Israeli B2C startups leveraged creator marketing in 2022

Read chapter →

Unlocking the Reels Opportunity

Reels is now seeing 140 billion plays across Facebook and Instagram every day

Read chapter →

Unlocking the Future: Metaverse

If metaverse adoption began in 2022, then its estimated total contribution to global GDP in 2031 would be $3.01 trillion

Read chapter →

The evolution of consumer-first digital companies in Israel

The landscape of consumer-first digital companies scaled massively over the last few years.

From a startup nation that mainly focused on B2B and mostly B2E (such as cybersecurity), we’ve seen a growing share of global consumer focused brands out of Israel.

2023 is shaping up to become a year of sobering, in which companies and investors alike are focusing on healthy unit economics, agile operations and ROA (instead of CAC) based growth marketing spend.

Ron Tamir
Founding Partner, Kaedan Capital


B2C landscape in 2023: Fast facts


Out of ±9,000 startups in the startup nation, consumer-first startups accounted for more than 25% of the ecosystem with over 2,500 companies. Source: IVC


In 2022, 35% of newly founded startups were consumer-first companies (up from 30% during 2018-2021). Source: IVC


In 2022, consumer-first companies accounted for 36% of unicorns and 24% of exited companies (public and acquired). Source: IVC


In 2022, B2C companies raised $1.7 billion (80% growth vs. 5 years ago) in an average deal size of $8 million. This accounted for ±10% of funds raised in Israel ±18% of deals. Source: IVC


Self-serve B2SMB companies raised $2 billion in 2022 with an average deal size of $23 million and accounted for 11% of deals in 2022. Source: IVC

Consumer-first verticals in Israel: Vertical map

10 years ago there were a few large consumer-first startups in Israel, mainly just gaming companies. Over the last few years, as this landscape evolved, new industries emerged as seen in the verticals map below.

Digital Health



Entertainment & Media


B2B SaaS

Consumer Tech



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“Every year should be the year of efficient growth, not just 2023. However, just as overspending to buy growth at all costs was a mistake in 2020 and 2021, so is underinvesting in the down markets of 2022 and 2023. The strong get stronger and the weak get weaker in tough markets. Now is the time to take market share and now is the time to invest in efficient growth.”

Alan Feld
Co-Founder and Managing Partner, Vintage Investment Partners


Our annual ecosystem survey

At the end of 2022, we ran a survey [1]. We wanted to dig deeper into the latest trends from 2022 and the ecosystem sentiment towards 2023.

Despite a turbulent year in 2022, consumer-first startups in Israel showcased strong resilience, both in growth and profitability:

  • 80%

    of companies surveyed reported positive growth YoY, despite the turbulence of 2022 and a high base of 2021.

  • 66%

    of surveyed companies reported growth of over 20% YoY.

  • 82%

    of companies that reported YoY revenue growth, also reported higher profits vs. 2021.

  • 40%

    of companies reported higher profits by more than 20% YoY vs. 2021

2023: The year of efficiency

While in 2020-2021 growth was the name of the game, with digital transformation that occurred given the tailwinds behind COVID-19, 2022 brought a wind of change, with companies shifting from a growth mindset to profitability focus.

Only 36% increased marketing budgets during 2022 vs. 2021.

For 2023, only half of the companies reported they will focus on growth:

Efficiency improvements will be based on a mix of measures:

Reducing customer acquisition cost (CAC) is top of mind - 63% of companies mentioned they’re worried about CAC:

Over the following chapters, we'll focus on the main opportunities to drive efficiencies in order to balance scale and growth with profitability.

“In 2023 and continuing through the next few decades, Israeli tech companies will aspire to earn a spot on the distinguished Fortune 500 global enterprise list. These companies will focus on sustainable growth with a positive impact on our society and environment. They will aim to scale bigger than before – exceeding $1 billion, $5 billion, and even $10 billion in annual revenues – making Israel one of the most vibrant and attractive innovation economies on Earth.”

Chemi Peres
Managing Partner and Co-Founder, Pitango


Funding trends

Year 2021 set a record breaking in investments in Israeli tech.

However, throughout 2022 we saw a decline by 43% in funding and 15% in number of deals.

When looking at funding trends by half, and considering the overall drop in 2022

We're actually at an even lower run rate, as historically H2 has been a stronger half.

The sharpest decline has been in investments in companies in growth stage, while early stage investments are less impacted.

Funding trends

Investors in 2022 shifted more focus on profitability. 45% of investors are attesting to an over 25% change in profitability goals:

By how much profitability goals changed in 2022 vs. 2021 among your portfolio companies?

Source: Meta Investors Survey, 2022

Investors also reported that they focused more on their portfolio companies in 2022 rather than new investments.

In 2022, how have you allocated your time?

Source: Meta Investors Survey, 2022

Valuations were dramatically impacted in 2022: 60% of investors estimated valuations of their portfolio companies were down 20-50%.

Source: Viola 2022 EoY Report "Israel's High-Tech Ecosystem", p. 25

2023 sentiment: It’s an investor’s market, but not an easy setting for VCs to raise future funds

In the next 2-3 years, you estimate it will be:

We will continue to see a decline in valuations over the coming months. Since the focus of B2C investors is on profitable unit economics, it is critical to raise money as soon as possible, once positive KPIs are achieved.

Danny Cohen
General Partner, Viola Ventures


US consumer trends

2022 was a challenging year:

  • US inflation was at its highest level in 40 years, reaching 9.1% in June 2022. However, it improved later in the year, ending at 6.5% in December 2022. (source: US BEA)

  • Consumer confidence declined significantly during 2022 amid rising prices and concerns of a looming recession.

  • Consumer savings were at their lowest level in decades. In December 2022, the personal saving rate (i.e. the ratio of personal savings to disposable personal income) in the US amounted to 3.4%, down from 7.5% in December 2021. (source: US BEA)

There are some signs for cautious optimism, but it remains to be seen how 2023 will shape up:

  • GDP growth returned to a positive outlook with 3.2% in Q3-22 and 2.9% in Q4-22 (source: US BEA)

  • The US labor market remained strong with a low unemployment rate of 3.5% in December 2022 (source: US BEA)

  • Consumer spending (in real value) in the US remained strong in 2022 (but consumers did dig deep into their savings) (source: US BEA)

  • Retail sales were up 9.2% YoY during 2022 vs. 2021 (source: US Census)

Industry overview

Over 300 startups with global presence make up the Israeli e-commerce landscape. It's made up of the following categories:











We surveyed dozens of leading e-commerce global brands, across stages, from the Israeli ecosystem. Here are the key trends that emerged:

In 2022, over 40% of surveyed e-commerce startups crossed $50M in annual revenue and have more than 100 employees. A new point in the maturity of the ecosystem of e-commerce in Israel:

The majority of companies are bootstrapped or have raised less than $5M to date. Funding isn’t as common in e-commerce as in other tech industries in Israel. As a result, most of these companies are profitable and healthy businesses - an advantage in 2022.

Given this advantage, most companies experienced revenue growth in 2022.

50% reported a rapid growth of over 40% YoY vs. 2021:

However, companies continued to invest in improving efficiency during 2022. 40% of companies reported they improved their profitability by over 20% vs. 2021.

The top trends

Trend 1

US e-commerce continued to pace strong even in a challenging year:

Online shopping significantly accelerated in 2020. The question was what would happen onced stores opened up. It turns out that old habits die hard.

However, e-commerce's share out of total retail in the US has remained strong and at a stable, high rate of ±15% out of total retail. This is 85% growth vs. pre pandemic.

Source: FRED, US Census

In 2022, US e-commerce surpassed $1 trillion with 10% YoY. (source: US Bureau of Economics)

The D2C (direct-to-consumer) segment (i.e. digital native brands that sell directly to consumers) – the closest to global e-commerce companies within the Israeli ecosystem – grew over 20% YoY, crossing $150 billion in 2022.

D2C e-commerce sales in the United States from 2019 to 2024 (in billion U.S. dollars):

Source: Statista

Shopify (its merchants represent this segment well) reported a growth in GMV on its platform of 13% YoY in 2022 vs. 2021. (source: Shopify financials)

Trend 2

The Israeli ecosystem of e-commerce startups grew 5X in 5 years:

Building global e-commerce brands out of Israel used to be a faraway dream, with only a few brands succeeding at a global scale. Today, the ecosystem has reached a new point of inflection in its maturity. In 2022, there were more than 300 global e-commerce brands out of Israel.

There are several brands reaching a global unicorn stage, like IL Makiage, and ones that are category leaders in the US, like Resident: the largest online mattress brand in the US.

Trend 3

While e-commerce continued to pace strong and consumer spending in US didn't halt despite inflation, companies in 2022 were still focused on efficiency and increasing profitability.

In our survey, 55% of companies mentioned they focused on profitability over growth in 2022.

This shift manifested in several ways: including setting stricter targets for marketing spend as a percentage of total revenue, or improving their operational costs:

“Collaborating with the Meta team in 2022 was a game-changer for Underoutfit. With their exceptional support, we were able to refine our approach, improve our creatives, expand our reach and even develop new products. Thanks to their expertise, we achieved 500% year-over-year growth and surpassed our goals for the year.”

Felix Leshno
Founder & CEO, Underoutfit


2023 opportunities

Non-VC backed companies have the opportunity to win market share

In the wake of challenging macroeconomics and the increase in interest rates, non-VC backed companies that are self-sustained and already possess a healthy DNA as a profitable business have an opportunity to gain market share. VC-backed companies that mainly focused on revenue growth in the past 2 years have now cut marketing spend across the board, leading to lower competition in certain fields. This creates a unique opportunity for brands who have always been focused on profit to invest in expansion and position the company ahead of the curve.

Indeed, in our survey, most companies reported they’re going to focus on expansion via new geos, products, audiences and distribution channels.

Are you working towards/considering any of the following growth opportunities in 2023?

With the increasing integration of social media and e-commerce, brands have the opportunity to leverage Meta’s on-site checkout platforms as new sales channels, and reach customers where they’re already spending time discovering new brands and engaging with content they love. (Source: Shopify Commerce Trends 2023: Industry Report)

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We're on a mission to help people create homes they love. We do that by creating easy-to-use products. We started with Mixtiles - the easiest way to hang your photos on your walls, and continued with Easyplant - the easiest way to grow houseplants. One of our growth strategies is product expansion.

Eytan Levit
Co-Founder, Mixtiles


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Industry overview

2022 was a turbulent year for digital health, or the health D2C industry. Whether it was the post-COVID aftershock, macroeconomic uncertainty or a drop in funding, most companies had to adjust, pivot or go dark. From that understanding, a few insightful observations emerged:

The rise of the bootstrapped health businesses

The ongoing question around consumers in health

The multi-serve model is becoming mainstream

Before diving into the above, some context is needed. The digital health sector in Meta, as we define it, includes three main verticals:

  • Consumer packaged health goods: Formulated foods designed to meet people or pets' nutritional needs.

  • Wellbeing: Holistic solutions to improve people's quality of life and prevent disease.

  • Health tech: Supportive technologies throughout the patient's journey or for particular health conditions.

Each vertical has sub-industries and categories: overall, we mapped around 300 relevant companies in the Israeli ecosystem. The industry has a "healthy" balance between VC-backed and profit-driven businesses, with an obvious shift towards the latter given funding sentiment.

  • We saw decline in mega-rounds (-60%), M&A activity (-50%), and IPOs and SPACs (18 vs. 99 in 2021).

  • On the positive side, we saw 107 startups reaching unicorn status (second highest year after 2021) and a 29% increase in median angel deal size.

Source: CBS Insights, State of Digital Health 2022 Report

Only 37% of the digital health companies that raised in 2022 were D2C, compared to 43% in 2021.

Together with health D2C stocks feeling market pressure (Peloton, Beachbody and more), and mobile privacy updates raising customer acquisition costs, it’s easy to understand the environment in which health bootstrapped companies have been born – and why health companies expanded their offering to additional revenue streams (payers, providers, employers and government applications).

Source: Rock Health, 2022 year-end digital health funding: Lessons at the end of a funding cycle

The main categories where we saw an increased interest in bootstrapped health-tech companies were online pharmacy, serving sensitive health topics, delivery of care and medicine for various use-cases for mental health conditions. We’re also seeing a slight rise in FemTech companies as a whole.

On the wellbeing side, fitness, personalized nutrition and weight management remain top growing categories, together with emerging categories like mindfulness, sport tech, sleep and self-improvement services. McKinsey research shows that consumers will keep spending more on products that improve their health, fitness, nutrition, appearance, sleep and mindfulness. In 2021, the wellness industry was estimated at more than $1.5 trillion.

McKinsey estimates the spend on wellness products and services to be more than $450 billion in the US, growing more than 5% annually. Millennials prioritize health and wellness more than other generations – and plan to prioritize it even more.

High prioritization of health and wellness attributes today, Millenials vs overall, % of respondents

Future high prioritization of health and wellness in the near term, Millenials vs overall, % of respondents

Source: McKinsey & Co., Still feeling good: The US wellness market continues to boom

The consumer packaged health goods industry is profit-driven by nature, with the online supplements category leading the way. This includes a wide range of products, like vitamins, minerals, herbal supplements, protein powders, weight loss supplements and more. Some trends shaping the online supplements category in recent years include an increased interest in natural and plant-based supplements, a growing focus on personalized nutrition and supplementation, and a rise in demand for convenience and subscription-based models. The dietary supplements market size alone is estimated at $155.2 billion in 2022.

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“Working with the Meta team in 2022 was an exceptional experience. Their innovative ideas, attention to our specific growth metrics and commitment to excellence were superb. We particularly appreciated their support in data, creative and various pillars of business strategy. In 2022, we invested in Meta solutions like Reels and user-generated content (UGC), powered by creators, to achieve strong performance and expand to new audiences.”

Dror Ceder
Founder and CGO, Lumen


The ongoing question around consumers in health

Although health and wellbeing is an essential part of our quality of life, the question remains if consumers have the affinity to pay-out-of-pocket for those products or solutions, especially in times of crisis.

Health consumers can be segmented by age and health status (healthy, single chronic, polychronic, etc), but it’s obvious that there are additional factors like genetics, social, life habits, financials, motivations and many others that determine each person's perceived health and wellbeing (equalling happiness and life expectancy).

Source: Global Wellness Institute, "Health, Happiness and the Wellness Economy: An Emirical Analysis

With clear signs of recession worldwide (400% increase in the number of global conversations about the topic of ‘inflation’ on Facebook from H1 ‘21 to H1 ‘22), consumers are in a “cost of living” crisis in which rising prices squeeze consumer’s purchasing power. (Source: Meta Internal Data, Global, H1 2021 to H1 2022 / OECD, July ‘22)

With 50% of Americans holding a medical debt, employers cutting in wellness benefits and rising costs across the health space, including paying out of pocket expenses, it's a fair assumption that consumers might rely on mandatory health and wellbeing services and won’t go premium.

Consumers' awareness and knowledge about the importance of health and wellness will influence their willingness to pay for these products or solutions. In recent years, there has been a growing awareness of the importance of self-care and wellness, leading to increased demand for products and services that promote health and wellbeing. Therefore, we’re optimistic on this matter.

The top trends

Digital health solutions will stay at the forefront of the industry

Digital health solutions have been gaining momentum in recent years, and the pandemic has accelerated their adoption. These solutions offer numerous benefits, including increased access to healthcare services, improved patient outcomes and reduced healthcare costs.

Access to health data will become a need for personalized care

Access to health data is already becoming a critical component of personalized care and this trend is likely to continue. Personalized care is an advanced approach that tailors treatment and self-care to the individual needs of each patient, based on their unique medical history, genetics, lifestyle and other factors.

AI and XR technologies will grow rapidly as a tech enabler for better health

AI has already shown promise in a variety of healthcare applications, such as medical image analysis, clinical decision support and predictive analytics.

XR technologies, such as AR and VR, are also becoming increasingly prevalent in healthcare, particularly in areas such as medical education, surgical planning and pain management.

Industry overview

The Israeli ad tech industry is one of the oldest in the country, and part of the founding fathers of global programmatic advertising. In its evolution since the 1990s, the industry continues to be the hub for some of the leading products and services in the global ad tech ecosystem, with a substantial hold throughout the value chain of ad monetization and affiliation.

On top of its tech and data infrastructure, the industry has developed content creation capabilities over the years, manifested across multiple companies with publishing activities and premium publishing brands. Whereas in traditional publishing data and tech are second to content, in the Israeli industry, content is a key factor for success – but after data and tech. This results in sustainable businesses that are able to be profitable through various monetization methods (ads, affiliation, B2B SaaS partnerships etc), and vast business model agility.

Due to its track record in the ecosystem and technological dominance, the industry is now home to global media technology holding groups, with both B2C and B2B offerings. M&As are accelerating the creation of these holding groups – a growing trend over the past few years.

B2C companies in the ad tech industry: 100-150

Categorized by the following revenue streams

Money raised to date

Number of employees

Annual revenue

Revenue growth in 2022

The top trends

There has been a growing number of M&As involving Israeli ad tech companies, creating more huge, global, media technology holding groups, with a foothold throughout the programmatic advertising value chain. Over the past couple of years we’ve seen a growing number of M&As of Israeli ad tech companies (Wazimo acquired by Minute Media for $60M-$70M, Pub Plus acquired by ClearPier for $60M, Hive acquired by OpenWeb for $60M, Content IQ & Vidazoo acquired by Perion, Aporia acquired by CentraNic, IMGN acquired by Warner etc). These companies are media technology companies, which are profitable from the get-go, and demonstrate a sustainable track record of double-digit YoY revenue growth. The combination of profit, hyper growth, and super advanced technology, makes them appealing for acquisitions, especially in the current macro-economic environment.

Partnerships as a growth engine

The main growth engine for B2C ad tech companies in 2022 was partnerships with traditional publishers, in which they leverage their cutting-edge technology as a B2B SaaS product that evokes disruption in the traditional media and publishing industry, and optimizing its revenue. This is an even bigger opportunity in 2023 due to macroeconomic effects on the publishing industry.

2023 opportunities

Progmmatic ads

Both directly sold ads and branded content have taken a hit, being the largest revenue decliners for publishers in the second half of 2022. As a result, publishers are looking to optimize revenue from programmatic ads to help navigate a potential recession. This is a huge disruption opportunity for Israeli ad tech companies, helping traditional publishers increase their revenue from programmatic ads through their technological, data driven solutions.

Selling through content

With the rise of costs and decline in CVR for intent based ads alongside the loss of third-party signals, leveraging content to convert discovery audiences into intent-based users is an even bigger opportunity for Israeli ad tech companies. Selling through content is a growing trend which we expect to continue into 2023.

Industry overview

The consumer tech vertical refers to B2C startups that are consumer centric and have tech in the core of the company. Over the years, several distinct industries have matured in the Israeli B2C ecosystem (such as gaming, fintech, health tech, commerce and more). We can clearly identify many companies in each industry in different sizes and stages.

Consumer tech (B2C tech) vertical in numbers:

  • Over 500 B2C tech startups in the Israeli ecosystem

  • The consumer tech vertical consists of a variety of B2C tech companies, many of which are consumer apps (both iOS and Android)

  • The main industries and verticals we identify in 2023 are:

  • Education (startups such as Simply, Masterschool and TinyTap)

  • Productivity (startups such as AI21, CallApp and Karma)