Global Focus: Israel’s Growing High Technology Industry

At only 20,770 square kilometers, Israel is a small country that is home to 8.9 million people (as of 2018), but the size of its high technology industry is larger than its geographical boundaries. Israel is recognized worldwide for its high-tech industry. It ranked third in the world after the United States and France in 2017.

Israel’s technological and economic center is the city of Tel Aviv, the second most populous city and the center of most activities in Israel. It is located along the shoreline of Israel’s side of the Mediterranean, about 72 kilometers from the country’s capital, Jerusalem.

A giant in global technology

Despite its small size, Israel is considered a giant in the high technology industry, globally speaking. Its status just keeps on increasing after the success of StoreDot (manufacturer of fast-charging smartphone battery), Wix (website builder similar to WordPress) and Fiverr (online platform for freelance services). Fiverr was launched in 2010. Two years later its list of freelance services has reached three million.

Silicon Wadi

Among the top 10 global tech hubs in 2018, Tel Aviv ranks fifth, according to the report of Expert Market. The top high-tech companies in the world, in reverse order, are:

10. Silicon Valley North, Vancouver, Canada
11. Silicon Roundabout, London, United Kingdom
12. Route 128, Boston, United States
13. Silicon Plateau, Bangalore, India
14. Zhangjiang Hi-Tech Park, Shanghai, China
15. Silicon Wadi, Tel Aviv, Israel
16. Silicon Hills, Austin, United States
17. Silicon Valley (Bay Area, San Francisco, United States
18. Silicon Allee, Berlin, Germany
19. Zhongguancun, Beijing, China

Easy access to business support

The tech scene in Tel Aviv is made up of a well-established system that encourages startups. Startups are the core of Israel’s high-tech industry that entrenched the country into the world’s high technology stage. They are able to support their companies through a large network of venture capitalists and angel investors. The government also extends support through tax relief for companies venturing in data, technology and digital businesses. Moreover, the supply of homegrown talent in technology is robust.

Tel Aviv’s tech companies become viable because they have to look to the markets across its borders due to the country’s geographic limitations. Therefore, startups have to quickly expand globally to reach more markets and improve their profits. It’s a situation that is very appealing to international business centers and investors, both local and foreign.

Several accelerators to improve the access to financial and training support are in Tel Aviv, such as the Founder Institute and 500 Startups. A number of incubators like Samurai Incubate Israel and The Time are also present. Events such as GarageGeeks, Pitch Tonight and Blockchain Israel make Tel Aviv a very appealing city to technology entrepreneurs.

2017 was a record year for the startups in Israel, raising up to US$5.2 billion in funds, which is a 9% increase over 2016. Merger and acquisition (M&A) business deals are increasing as well because of the strong performance of many of the tech companies in Israel. A few of them were notable because of the size of the deals.

In March 2017, Israel was in the business news because one of its companies was purchased by a foreign company. The acquisition price, which was the largest for an Israeli company, amounted to US$15.3 billion.

Do you know which company it was? It was an automotive technology company named Mobileye, which was purchased by Intel. Mobileye is a world leader in the manufacture of ADAS or vision-based advanced driver-assistance systems. It provides drivers with warnings to prevent mitigation and collision.

In July 2017, Mitsubishi Tanabe Pharma of Japan acquired NeuroDerm for US$1.1 billion. NeuroDerm develops next-gen treatments for humans’ central nervous system.

Another strong year

For Israel’s high-tech industry, 2018 is another strong year. Yes, there are risks but the industry’s growth is not waning. They still have US$3 billion in venture capital funds that are not yet invested. China and India are willing to invest in Israeli startups as well.

The industry’s successes have their own pitfalls as well. Talents are getting scarce and salaries of software and hardware engineers with less than two years’ experience are rising.

The Israel Innovation Authority, a government agency, established a 10-year program to increase the number of technically capable workers. The agency is also setting a system to help companies bring in foreign talents to fill up the gap. But since it might take time, many companies are turning to outsourcing overseas.

A peek into the history of the high-tech industry of Israel

The history of Israel’s high technology industry started about 20 years ago. Small startups started sprouting in the country and some of the top technology companies in the world joined as the country has an abundant supply to talents. They established research and development centers in Israel.

Why did Israel become a high-tech industry hub?

• Israel does not have too many natural resources but it has a diverse population, with a number of skilled immigrants, especially those who came in the 1990s from Russia.
• The country has some top-ranked universities such as Tel Aviv University and the Hebrew University. For those interested in research, the Weizmann Institute of Science is the world’s best.
• The army of Israel brought forth their skills and knowledge. Many of the technological products in Israel have their origin from military technologies. One good example is Given Images’ pill cam. The technology behind it came from the camera mounted on a missile’s head.
• Israel has developed a culture of innovation. They do not fear failure when they solve problems, one of the reasons why there are so many startups in the country. The country attracts more venture capitalists than Europe and has more firms listed in NASDAQ compared to other countries except for North America. Would you believe that the number of patents filed by Israel far exceeds its population compared to any other nation?
• Israel’s startups get full support from the government. They also have easy access to the public, private and academic sectors. This means that the technologies they develop in their laboratories are quickly turned into products that big companies worldwide immediately purchase.

Thus if you visit Tel Aviv, you’ll see the city’s panorama dotted with signages from international high-tech companies. You might not even know that some of the apps you are using are from Israel’s startups.

Did you know that Waze, the GPS navigation app, was a product of Israel’s Waze Mobile? It was initially released in 2006. Waze is now owned by Google, which acquired the company in 2013. Other products created by Israeli startups include Face.com, Boxee, Somoto and Wibiya. The latter was founded in 2008 and acquired by Conduit in 2011 for $45 million. Without giving a reason, Conduit closed the company in 2013. Wibiya was an online toolbar platform.

New companies to watch out for

Indeed, Israel is a powerhouse when it comes to high-tech companies. It looks like the country’s startups are not letting up as more of them are churning out product after product, taking their innovativeness and creativity several steps into the future. Here are a few of the companies that are worth watching.

1. Airobotics. The company is marketing autonomous drones that have various applications, including mapping and surveillance. Oil and gas and mining companies are also markets for the drone. The drones do not need human operators, which contributes to the safety of humans when the drones are deployed in dangerous and remote places. They are also durable, tough and weatherproof.
2. Zebra Medical Vision. It’s a medical tech company that has developed an AI platform capable of reading medical scans. The product is able to detect anomalies automatically and furnish medical image diagnoses accurately. It is now collaborating with Google Cloud, providing the application with its algorithms to enable medical professionals and hospitals to access its service. One U.S. dollar is charged for each scan. Zebra, founded in 2014, has raised $20 million in seed funds.
3. Boom25. This is an online shop with a cashback program for its shoppers. While other cashback programs encourage people to shop from member sites to avail of percentage refunds from purchases, Boom25 gives its 25th customer a full refund. Boom 25 was only launched in 2017 but it already has about 700 retailers. Some of them are big name shops, such as Argos, Expedia, M&S and Boohoo. About 4,000 people have been awarded refunds since its launch, the biggest being US$4,100. It has already raised seed fund worth US$1.5 million and will have a second round of raising funds this year.
4. Deep Instinct – Cybersecurity is the main concern of this company. It has developed a solution to fight cybersecurity in real time for different operating systems, platforms, endpoints and mobile devices. It was established in 2014.
5. Monday.com.  It used to be called Dapulse. Monday.com developed a project management tool with centralized workplace communications that include presentations, documents and emails. It is capable of handling a small team to large teams with international collaborators. Monday.com was established in 2012. Today, its project management tool is used by 22,000 international companies such as Uber, Fiverr, Wix, McDonalds and Adidas.

These are just some of the latest developments in Israel’s booming high-tech industry. The growth of the country’s major industry is attributed to its innovative, fearless, industrious, creative and risk-taking population who have the audacity to harness their inherent skills to make up for what their country lacks in natural resources.

Communicate with your global partners

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