Why Israel Has Become the Startup Nation

By Brian Wallace Brian Wallace has been verified by Muck Rack's editorial team
Published on May 9, 2023

Israel has been thriving on the tech startup scene, especially in the past decade. The country received 25 times more capital flow than the U.S. in 2021 alone, supporting its title as a startup nation. Israel’s companies have helped the country grow successfully from tech companies raising $14.95 billion through more than 600 deals in 2022 to cybersecurity startups raising $8.8 billion in 2021 (more than three times the amount raised in the prior year). 

R&D Makes a Difference

With the country’s achievements, Israel is currently ranked second in the world for R&D spending and third in terms of the number of machine learning and AI startups. In fact, Israel invests almost 5% of GDP into R&D, which is twice the OECD average. The country currently hosts R&D centers for at least 12 large companies, including Intel, IBM, and Google. 2021 saw 84% of the Middle East and North Africa’s total venture capital funding going to Israel as well. 

Israel’s city of Tel Aviv has especially experienced large success as the 7th largest startup environment globally. It has increased its patent count by more than 140% since 2021. Also in 2021, Tel Aviv startups raised $20 billion while gaining 30 new unicorns (companies that are worth $1 billion or more), bringing the total number to 92 unicorns in 2022. In the city, it takes seven years to exit, which is almost 2 years less than the global average, and innovation centers have been created by top companies like Apple and Volkswagen. 

In terms of Israel’s startup success, there are several factors helping businesses succeed. Many U.S. venture capital firms have established offices in the country while Israeli startup founders have similarly moved headquarters to prosperous U.S. cities to use the local investment. Going public or selling to large U.S. tech businesses have made Israeli companies attractive to venture capitals as well. 

Israel has created a haven for businesses through various government programs, tax incentives, and grants. One Israeli government program called Yozma matched outside venture capital investment in a startup while several grants and tax incentive programs for R&D were created, including tax exemption and conditional grants. Employment aid programs had wage subsidies for new employees for several years and intellectual property incentives provided tax benefits and deductions for those who invest in Israeli companies or create intellectual property assets in Israel. 

Expanding Opportunity in the Middle East

The Abraham Accords had a powerful impact as well since it helped establish more economic relationships in the Middle East for Israel. This means that 150,000 new jobs could be created for the four signatories: Bahrain, Israel, United Arab States, and the U.S. If the accords grow to include 11 nations, more than 4 million jobs could be created with more than $1 trillion in new economic activity being produced over a decade. 

With one tenth of the world’s unicorns presently in Israel (including OverWolf, Justt, and  Ermetic), it’s no surprise that the OurCrowd 10th Annual Global Investor Summit was held in Israel. The summit typically sees more than 9,000 people register from 81 countries with at least 1,000 MNCs and 900 entrepreneurs in attendance. Israel’s long history of great innovation also means that the country is associated with a number of influential people, including entrepreneur and investor Yossi Vardi as well as software engineer and entrepreneur Gil Shwed. 

Conclusion

There’s no doubt that Israel will continue to contribute great global entrepreneurship for many years to come.

 
How Israel Has Emerged on the Tech Scene

By Brian Wallace Brian Wallace has been verified by Muck Rack's editorial team

Brian Wallace is a Columnist at Grit Daily. He is an entrepreneur, writer, and podcast host. He is the Founder and President of NowSourcing and has been featured in Forbes, TIME, and The New York Times. Brian previously wrote for Mashable and currently writes for Hacker Noon, CMSWire, Business 2 Community, and more. His Next Action podcast features entrepreneurs trying to get to the next level. Brian also hosts #LinkedInLocal events all over the country, promoting the use of LinkedIn among professionals wanting to grow their careers.

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