As Israel celebrates its 75th birthday, news from the Jewish state is focused not on its incredible achievements but on internal strife, economic distress, and particularly, the threatened collapse of its high-tech sector, the engine behind its economic flourishing. Yet the obituaries for the “Start-Up Nation” are premature. Israel’s innovation ecosystem retains its underlying strengths, and when Israelis overcome their political challenges, the country is poised to further its high-tech miracle.
From the moment of its birth, Israel has fought through turmoil. Its history is riddled with wars, terror, economic crises and floods of immigration, all in a piece of land with hardly any access to water or other natural resources. But these events helped foster a society, economy and country that is a marvel to the world today.
In the past 30 years, I have been intimately involved with the growth of Israel’s innovation ecosystem, both in the private and public sectors. As Israel’s Chief Scientist from 2010 to 2017, the founding chairman of the Israel Innovation Authority—a government agency designing and executing innovation policies supporting the ecosystem—and now as CEO of Start-Up Nation Central (SNC), a nonprofit dedicated to strengthening Israel’s high-tech sector and connecting it to global challenges, I am intimately familiar with the high-tech ecosystem and am confident that its best days are ahead of it.
Israel is home to the world’s largest number of startups per capita, with one startup or tech company for every 1,300 people. SNC’s database tracking the companies and investment activity within the Israeli startup ecosystem, Finder, includes more than 7,000 startups, 850 investors and nearly 400 multinational corporations. The Jewish state has more than 130 companies listed on NASDAQ—more than any other foreign country besides China and Canada. It attracts more venture capital per capita than any other country, with an excess of $27 billion in 2021 and $15 billion in 2022. And it invests more in R&D (approximately 5% of its Gross Domestic Product, excluding military and defense R&D) than any other country as a percentage of its GDP. Investors throughout the world continue to see immense opportunity in Israel; for example, General Atlantic has invested nearly $1 billion in Israeli early-stage companies since 2019 and last year opened a Tel Aviv office to source more deals from the Israeli ecosystem despite the global slow-down of venture capital spending.
This leading position didn’t come despite Israel’s myriad security and resource challenges, but in many ways as a result of them. Israeli culture is entrepreneurial, striving for solutions above consensus. It is a meritocratic society, enabling responsibility and decision-making down the ranks in the military, which cascades into business, community and civil society.
These attributes enabled Israel to develop cutting-edge technologies across multiple dimensions—from the Iron Dome anti-rocket defense system to water technologies that have made Israel the world leader in desalination, with desalinated water accounting for 85% of its drinkable supply. Israel is also a cyber-tech powerhouse, home to approximately 20% of global investment in this sector. Even during the recent domestic tumult, for example, the Israeli cybersecurity startup, Cybereason, raised a $100 million round from SoftBank. And Israeli companies are trailblazing the food technology space. Israel is only second to the United States in investments in food tech, raising more than $1 billion over the last two years. Alternative proteins, including cultivated meat, plant-based meat, eggs and dairy, and fermentation technologies will revolutionize the whole value chain of food from production to consumption. And Israel has 800-plus companies with technological solutions adapting and mitigating climate change.
The world is undergoing a severe economic downturn, with the tech sector taking a particularly strong hit. Israel is no exception; investments and private tech companies’ valuations are plummeting. Moreover, Israel is currently facing an unprecedented clash between the government and vast portions of society, including the high-tech sector. But Israel has emerged from past internal and global crises much better than others. Its core fundamentals—a well-developed innovation ecosystem, a dynamic talent pool, resourceful thinking and risk tolerance—make me believe that Israel’s high-tech ecosystem, and the Jewish state itself, will emerge from these challenges stronger than ever before.
Avi Hasson is CEO of Start-Up Nation Central, a nonprofit organization that addresses the Israeli innovation ecosystem’s most pressing needs and broadcasts its strengths to the world. Prior to that, he served in a wide range of private and public roles in the tech industry, including as Israel’s chief scientist.
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