Israel is a very new contestant when it comes to the tech startup game but has quickly solidified its place as one of the best places in the world for a tech startup to succeed. In 2022, Israel’s tech companies raised nearly $15 billion through 663 deals and in the year prior had 57 new companies go public.
These companies raised over $4 billion – almost 3 times more than the $1.7 billion raised by IPOs in 2020. Israeli cybersecurity startups raised $8.8 billion in 2021 – more than tripling the amount raised only the year before.
Israel invests much more into R&D than nearly any other country. 4.1% of GDP is invested into R&D, more than 2 times the OECD average, making Israel ranked number 2 in the world for R&D expenditure per capita. Israel is also in the top 3 in the world for the number of AI and machine learning startups.
1 out of 3 cybersecurity unicorns in the world is an Israeli company. Israel also hosts R&D centers for massive companies, such as Amazon, Apple, Google, and Microsoft. Tel Aviv alone has $120 billion worth of startups and is the 7th largest startup ecosystem in the world.
Reason Behind Tech Startup Success In Israel
There are a number of reasons that are driving the success of the many companies in Israel. Many US venture capital firms have offices in Israel, helping drive more eyes to the region as a whole. Israeli startup founders also commonly have small local markets, forcing those who wish to succeed on a larger scale to quickly turn their attention to the global market.
Startups that go public or sell to large US tech companies also make Israeli startups very attractive to VCs around the world. Another large driving force that helps startups succeed in Israel is Yozma, a program launched by the Israeli government in 1983.
This program matched outside venture capital investments into Israeli startups and later asked the VC firm to return its investment if the company was able to have a successful exit.
In addition to the Yozma program, there are many grants and tax incentive programs that are offered for R&D. Intellectual property assets that are created in Israel or transferred to Israel also qualify for a number of different tax reductions.
Learn more about how Israel has become a startup nation and has become one of the best tech hubs here.
