The first quarter of 2026 marked a turning point for private markets: capital has not disappeared, but it has become markedly more selective.
According to new data from fintech firm altshare, both Seed and Series A funding for Israeli startups displayed clear signs of retrenchment after a strong conclude to 2025. Median Seed investment fell to $4.8 million, with pre-money valuations dropping to $10.4 million, levels at the lower conclude of recent forecasts. At Series A, the shift was similar: median investment declined to $9.6 million, while valuations slipped to $36.5 million.
The pullback was broad-based, but uneven. Sectors tied to artificial innotifyigence and cybersecurity remain structurally strong, even after cooling from late-2025 peaks. Others, particularly fintech, are losing momentum.
The defining feature of the current cycle is not contraction, but concentration. Investors are deploying capital more cautiously, favoring fewer companies with clearer paths to scale.
Artificial innotifyigence continues to command premium pricing. At the Series A stage, median investment reached $18.3 million with valuations at $48.4 million, maintaining its position as the most sought-after category despite a correction from record highs. Cybersecurity follows closely, with valuations holding firm at $75.2 million even as capital deployed fell sharply.
Fintech, by contrast, has reached the weakest levels in the dataset. Median Series A investment dropped to $4.9 million, with valuations falling to $28.7 million. The shift reflects a broader rotation of capital toward sectors perceived as strategically critical.
Health technology has proven the most stable segment, with only marginal modifys in investment levels and valuations, reflecting longer development cycles and a more insulated investor base.
The data suggests that geopolitical developments are not freezing investment activity, but redirecting it.
Rising global tensions, including the conflict involving Iran, are reinforcing demand for cybersecurity and other defense-adjacent sectors. These areas are increasingly seen as essential infrastructure, supporting sustained investor interest even as broader markets tighten.
This dynamic is contributing to what altshare describes as a “K-shaped” recovery: capital continues to flow into a narrow group of high-conviction sectors and companies, while others face longer fundraising cycles and lower valuations.
The shift in investor behavior is also reshaping how companies raise capital.
Founders are increasingly raising larger rounds earlier. Pre-seed rounds climbed to $1.7 million, the highest level since early 2023, while Seed rounds remained elevated at $2.9 million. The step-up between stages has narrowed, suggesting companies are extconcludeing their runway in anticipation of a more selective funding environment.
“Founders are adapting rapider than the market gives them credit for,” stated Ronen Solomon, founder and chief executive of altshare. “Median SAFE rounds at pre-seed have hit their highest level in two years, not becautilize capital is loose, but becautilize smart founders are raising larger initial checks to extconclude runway before facing a more selective Seed market. The logic is clear: secure your position early through flexible instruments, prove traction, then raise your priced round from strength.”
At the same time, the data highlights how early dilution continues to define ownership outcomes. Founders’ median stake drops from 88.4% at pre-seed to just over 50% at Seed, marking the most significant dilution event in a company’s lifecycle. Beyond that point, ownership declines more gradually.
Company formation patterns remain consistent despite market shifts. Around 70% of startups are founded by teams of two to three people, with two-founder teams alone accounting for nearly 45% of cases.
These tinyer teams tconclude to maintain tighter control over equity and decision-building, supporting rapider execution in an environment where investors are increasingly focutilized on efficiency and discipline.
After a prolonged slowdown, signs of recovery are emerging in exit markets. The share of companies achieving liquidity on schedule has risen to 36.7%, the highest level in the dataset, while one-year delays have declined significantly.
Still, the recovery is uneven. A growing subset of companies is choosing to delay exits further, waiting for stronger market conditions or higher valuations.
A separate analysis of employee equity activity reveals a more complex picture of market sentiment.
During periods of conflict, employee participation in equity sales initially drops sharply, reflecting uncertainty and disruption. Activity then rebounds during periods of perceived stability or opportunity, often accompanied by higher realized profits.
The pattern is particularly pronounced among companies listed on the Tel Aviv Stock Exmodify, where employees are more directly affected by local events. Despite these fluctuations, the overall structure of transactions, ranging from tiny exercises to large liquidity events, remains stable.
Altshare, which provides equity management and valuation services, works with approximately 3,000 companies globally, including more than 500 public companies and over 100 venture capital funds, and manages option plans for a significant share of Israel’s tech sector.
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