Corporate Innovation Outposts in Israel – 2023 Report
The flow of large corporates setting their own innovation outpost in the Startup Nation is in continued acceleration. As of today, an “army” of over 40 thousand people by 182 multinational companies is hunting innovation in Israel with one or more innovation outposts.
The reasons for such a presence are easy to explain if we look at the numbers. The Israeli innovation ecosystem has been able to produce over 2,291 scaleups able to cumulatively raise $108B. That equals to 32.5 scaleups every 100,000 inhabitants. Excluding Silicon Valley, there are no other places in the world with such a high Scaleup Density. Similarly, the Scaleup Investing Ratio (capital raised compared to GDP) is the second highest in the world. That means Israel is increasingly stepping up in maturity as shown by the number of Scalers (i.e. tech companies able to raise $100M+) and Tech Giants (we tracked 8 Super Scalers backed by over $1B each).
The role of global corporations is key for the success of the Israeli ecosystem.
Global companies have been operating in Israel for decades, mostly through an R&D approach. During the last few years, we have seen a strong shift towards a leaner approach and the use of open innovation mechanisms. More companies are increasingly experimenting with different partnership models, making innovation more cost efficient. This trend is similar to what we have been observing since 2010 in Silicon Valley.
That said, Israeli innovation outposts remain on average larger in size compared to the ones in Silicon Valley where, despite a broader presence (almost double in number, 405 vs. 224), the overall number of innovation executives is only 25% higher. This confirms that innovation outposts in Israel have a more research/co-development approach, while the raison d’etre of the presence in Silicon Valley is more transactional (investments and M&A). As a consequence the volume of CVC deals in the Bay Area is higher by an order of magnitude.
Almost one out of two corporates with an outpost in Israel are from the US (87 out of 224), clearly showing the strong innovation ties between the two countries. Europe (with 57 companies, 25%) and APAC (34 companies, 15%) do follow with Japanese and German companies leading the pack. Still limited, although on the rise, is the presence of China and India (2-3%). Electronics, IT & Software are the most represented industries in Israel, versus Automotive, Electronics and Finance in Silicon Valley.