— by Ilan Regenbaum 

Israel has rapidly become one of the world’s most dynamic startup ecosystems, attracting attention and investments from multinational corporations including the likes of Apple, Google and Intel (just to name a few of the over 200 MNCs with a presence in Israel). With a population of just over 9 million people, Israel has more startups per capita than any other country in the world, and has produced more than 30 unicorns (companies valued at over $1 billion) to date, from Waze to M-Systems, Mellanox and Mobileye.

The Israeli startup ecosystem is particularly attractive to multinational corporations because of its focus on deep-tech. These businesses are often working on technologies that are years or even decades ahead of their time. Many are developing products that have the potential to transform entire industries. This makes Israel the ideal place for innovation teams who intend to focus on R&D activities and for venture capitalists interested in investing in “the next big thing”.

A startup economy led by cybersecurity, fintech and medical tech 

In terms of sectors, Israel is particularly innovative in the areas of cybersecurity, fintech, and medical technology. The country’s cybersecurity startups are world-renowned for their ability to develop cutting-edge technologies that can protect businesses and governments from ever-evolving cyber threats. Fintech startups are similarly impressive, with many working on technologies that are transforming the financial services industry. Finally, the medical technology startups are developing everything from new drug delivery systems to digital health solutions that are helping to improve patient outcomes.

Israel vs Silicon Valley

While Israel’s startup ecosystem shares some similarities with Silicon Valley, there are also some key differences. For one, tech companies in Israel tend to be more focused on solving real-world problems, rather than creating products that are more speculative in nature. This is partly because they tend to be more connected to the country’s defense and security industries, which require solutions to real-world challenges.

Another key difference is that Israel’s startup ecosystem is more insular than Silicon Valley’s. While the Bay Area is known for its vast network of investors, entrepreneurs, and corporate partners, the Israeli region is more tightly-knit. While Israel has developed its own network of investors and entrepreneurs, these relationships often evolve from shared experiences in the Israel Defense Forces, from required military service that Israelis must complete. This has advantages and disadvantages – on the one hand, it means that the latter can often move quickly and develop strong partnerships with other local companies. On the other hand, it can make it more difficult for them to access capital and partnerships from outside the country.

Lastly, Israel is a very small country that has a limited market. Thus, local companies often look to the United States and Europe as their first markets. This means that many Israeli innovations never make it to the local market, as it is not financially viable to launch in such a small market, but it also makes for a unique market for corporates and other international tech companies to test their products in Israel. For example, scooter companies like Bird and Lime came to Israel very early on to test new ideas for last-mile transportation, while hundreds of multinational corporates open R&D and innovation centers in order to tap into the innovation ecosystem.

A land of Unicorns

Just to name a few, Waze (acquired by Google for around $1b), M-Systems (early success from around 1989 developing the first disk on key and making flash memory accessible, acquired by SanDisk for $1.6B), Mellanox (a network hardware company bought by NVIDIA for almost $7b), Mobileye (Intel bought them for over $15B, then they went public again on their own recently), Fiverr (the gig-economy site), Wix (the website creation platform), Lemonade (the insurance company), and Monday.com (the project management platform), and Believer Meats (growing real meat in a lab to reduce carbon output actually the keynote at our Israel Scaleup Summit).

The Israeli Ecosystem 

The top research universities are the Technion (often called the MIT of Israel), the Weizmann Institute, the Hebrew University of Jerusalem, Tel Aviv University, and Ben-Gurion University of the Negev. The IDF-Israel Defense Forces, is a major contributor to innovation: Unit 8200, Unit 81 and the Ministry of Defense R&D Unit (MAFAT) are some of the top sources of innovation and many graduates go on to start startups. Some of the most active VC funds include Aleph, TLV Partners, OurCrowd, Vertex Ventures, Viola Ventures, and Vintage Investment Partners Some of the top accelerators include 8200 EISP and MassChallenge. 

Scaleup Summit Israel 2023: the new Report

In summary, the Israeli startup ecosystem is one of the most dynamic and innovative in the world, and is attracting significant attention and investment from multinational corporates. Thanks also to a historic tradition of academic research and a strong specialization in deep-tech, Israeli startups are well-positioned to continue disrupting industries and creating value for investors and customers alike.

Let’s then reconvene in Tel Aviv in April for the Scaleup Summit, where a delegation of international companies will have the opportunity to explore the Startup Nation and meet its main stakeholders through a dedicated scouting sprint. But not only. It will also be an opportunity for a sneak preview from our Mind the Bridge Report on the Israeli ecosystem.

Can the current political situation in Israel compromise Israel’s role?

There is reason to believe that the political protests and debates over legal reform that have been taking place in Israel pose any risk to the safety of anyone who is living in, or planning to visit Israel. Legal reform has been a major question in Israel for decades, and the largely peaceful protests of the last few weeks (protests are somewhat of a past time in Israel, often evolving into giant social events versus violent gatherings), recently led to the Prime Minister putting all legal reform on hold in order to hold discussions with both coalition and opposition parties to find a compromise. It is my personal opinion that whatever direction that compromise takes, Israel will remain a vibrant democracy, with a strong economy and stable institutions (including the government, police, military, and banks). Additionally, there are no alerts warning against travel to Israel posted on either the US or Italian Embassy websites.

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