Israel believes in the philosophy of ‘balagan. It is part of the Israeli mentality and culture that serves as a reminder to not always work in an orderly way. There needs to be chaos or disruption. Balagan is a unique word because contrary to the implied negative value, it is positive. The intrinsic quality of chaos and disruption is the propeller of the startup ecosystem in Israel.
According to a Deloitte report, Israel is home to 6000 active startups. The ecosystem is dominated by industrial high-tech and entrepreneurship. Its high concentration of startups per capita has earned it the title of ‘startup nation’.
According to Techaviv, a global Israeli startup founders club, there are almost 100 Israel-founded private tech companies valued at over USD 1 billion.
In the 1990s, Israel’s main source of tech funding came from its military, defence, and large aerospace R&D funding. Reportedly, Israel’s Military Intelligence Agency – Unit 8200 is credited with playing a key role in developing Israel’s high-tech know-how, which has resulted in the country having the highest concentration of startups per capita in the world and consistently ranking as a global leader in innovation. Unit 8200, for example, provides graduates with access to new technology and over 1,000 startups have been founded by former members to date.
Innoviz is among the largest Israeli startups focused on developing autonomous driving technologies. Founded in 2016 by a group of former IDF staff, the startup is working to develop perception technology and lidar sensors at affordable prices. Cybereason is among the numerous cyberdefense startups to have come out of Unit 8200. Founded in 2012, the company has developed a security platform that helps companies detect, prevent, and analyze online threats.
The idea of Argus Cyber Security founded by Unit 8200 alumnus Ofer Ben-Noon, securing connected cars is not a plan for the distant future, but very much part and parcel of what the company is working on at the moment. Equipped with predictive intelligence and remote diagnostics, autonomous cars are increasingly susceptible to hacks, a risk that is only expected to grow as we inch closer to a driverless future. Sentra, which took its total funding since its founding 18 months ago to USD 53 million, was co-founded by Asaf Kochan, the former Commander of Unit 8200, Yoav Regev, who headed Unit 8200’s Cyber Department under Kochan, Ron Reiter, and Yair Cohen.
Recently, Israeli startup Gem Security has raised USD 11 million from a seed funding round as it rolls out its integrated technology platform to help businesses and large organizations detect and respond swiftly to cyberattacks on their cloud-based services. The seed funding round was led by Israel’s Team8, which creates and invests in cybersecurity, artificial intelligence, and big data startups. It comes just nine months after the cybersecurity startup was founded by a team of security industry veterans: Arie Zilberstein, who serves as CEO; Ron Konigsberg as CTO; and Ofir Brukner, Vice-President of Product. The three graduated together from Israel’s military elite technology Unit 8200.
According to Dealroom, VC funding into Israel has been steadily increasing over the past decade reaching USD 10bn in 2021. Pitchbook data has shown that the first half of 2022 saw Israeli companies secure €5.4bn in deal value, up from €4.2bn in deal value in the second half of 2021.
It is interesting to note that according to Techaviv, just 40.2 percent of Israeli unicorns are still headquartered in Israel, while 24.7 percent are based in Silicon Valley and 19.6 percent are based in New York.
Tel Aviv is the epicenter of the Israeli startup ecosystem, raising 63 percent of total startup funding in 2021. Total VC funding in the city hit USD 30 billion between 2017-2021, compared to the global average of USD 4.5 billion. Startups also exit faster in Tel Aviv – after 7 years vs. the global average of 9 years on average. Last year alone, Tel Aviv gained 30 new unicorns and welcomed 20 scale-ups on the stock market.
As early as 1993, the Israeli government initiated the Yozma Programme, offering attractive incentives to foreign VCs to invest in Israel: a matching scheme that promised to double any investments with public funds, as well as tax incentives. At the time, this approach stood out among startup ecosystems around the world. Eastern European governments, for instance, were much slower in incentivizing venture capital, although more schemes are being launched or expected in recent years.
Startup watchers indicate that the other formal programs in place for Israeli startups include more than 40 programs by the Israel Innovation Authority (IIA), also known as the Office of the Chief Scientist (OCS), with an annual budget of about USD 400 million. There is also an Intellectual Property Incentive that offers tax reductions for corporate, dividend, and capital gains tax rates; Angel’s Law that provides tax benefits and deductions to single investors who finance Israeli companies during the R&D (seed) stage, and an incentive program of employment grants for R&D centers and large enterprises.
It is also important to note that Israel invests about 4.1 percent of its GDP in R&D, the second-highest R&D expenditure per capita worldwide.
In Israel more than 300 multinational corporations have established R&D centers, and account for 50 percent of business enterprise R&D expenditure, a trend we also notice in the CEE region. Multinationals, including Volkswagen, Anheuser-Busch, Apple, Citibank, and over 130 others, have established innovation centers in Tel Aviv. In turn, multinationals acquire local companies and foster a culture of entrepreneurship and technological leadership.
A report from research firm Startup Genome says the Israeli city’s startup scene is worth USD120 billion; AI, cybersecurity, and big data are the strongest sectors. Israel’s small population of fewer than 9 million forces tech (and other) companies to look outwards to find markets for their products and services, contributing to the global but innovation is local.
Goa can learn from Israel. Innovate and incubate technology in the state, then startups can find markets in India and other international markets.
