Israel And Tech Startups

Wednesday, 19 April 2023, 6:30 pm
Press Release: Hugh Grant

Israel has become one of the major world players in tech startups. In 2021, Israel received almost 30 times more capital flow than the U.S. on a per capita basis, supporting its reputation as the startup nation. In fact, Israel’s high-tech companies raised about $15 billion through 663 deals in 2022. So much so that many now refer to Israel as Startup Nation.

Israel ranked number two in the world when it came to R&D expenditure per capita while also ranking number three for the number of AI and machine learning startups they have. One third of the cybersecurity unicorns in the world is Israeli, and the country itself hosts R&D centers for large companies such as Amazon, Facebook, IBM, and more. In 2021, 84% of MENA’s total VC funding went to Israel.

The city of Tel Aviv is the seventh largest startup ecosystem in the world with patent count having increased by 169% since 2021. Furthermore, 2021 saw Tel Aviv startups raising $20 billion while gaining 30 new companies valued at $1 billion or more (considered unicorns), resulting in a total of 92 unicorns in 2022. The city also saw innovation centers established by top companies like Volkswagen and Apple. Israel has created significant opportunities for entrepreneurs and innovators through a wide range of government programs and tax incentives.

There are several factors driving Israel’s business success. One is the many U.S. venture capital firms having offices in Israel. Israeli startup founders also brought headquarters to thriving U.S. cities to utilize local investment. Selling to large U.S. tech companies have made Israeli companies appealing to VSs while small local markets and security issues caused Israeli entrepreneurs to operate globally.

A government program launched in 1983 called Yozma matched outside venture capital investment in an Israeli startup and asked the venture capital firm to return its investment if the company exited successfully. More than 30 grants and tax incentive programs were created for R&D as well, including conditional grants and tax exemption. In 2022, a $70 million program was initiated to promote entrepreneurship among Arab communities.

Employment aid programs in the form of wage subsidies for new employees range from 10-40% up to several years. In terms of intellectual property incentives, IP assets created in Israel or transferred to Israel qualify companies for reduced corporate, dividend, and capital gains tax rates. More than 40 R&D grant programs for multinational companies, individual entrepreneurs, research institutions, and NGOs offering a customized incentive toolbox and programs that offer up to a 50% deduction in R&D expenses for specific sub-sectors have contributed to Israel’s business success as well.

The Abraham Accords signed on September 15, 2020, made relations with the United Arab Emirates and the Kingdom of Bahrain normal. This helped Israel’s economic relationship in the Middle East while 150,000 new jobs were created for the four signatories. If the accords are able to include 11 nations, more than 4 million jobs can be created as well as $1 trillion in new economic activity over a decade.

A tenth of the world’s unicorns originated from Israel. Some of the most notable Israeli startups include OverWolf and Torq. The OurCrowd 10th Annual Global Investor Summit saw 9,034 people, 943 of whom were entrepreneurs, registered from 81 countries. 111 delegations and more than 300 press participated as well.

With a history of incredible innovation, Israel is associated with several influential people, including Yossi Vardi, an Israeli entrepreneur and investor who founded and helped build over 85 high-tech companies across multiple fields. GIl Shwed is also a good person to know as he is the co-founder and CEO of Check POint Software Technologies Ltd, one of Israel’s largest tech companies and the world’s largest pure-play cybersecurity company.

Israel’s drive for innovation is undeniable, and we will see over time the full impact they will have on global entrepreneurship.

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