The Israeli Innovation Ecosystem is Growing Up

There’s a unique element of fusion within the Israeli ecosystem, which is probably a reflection of the culture within which it exists. A very typical scenario: two people (known locally as “startupistim”) having a chat over coffee at a meetup. They begin talking about how something is wrong with the ecosystem, they agree that there should be an initiative to solve this, they then decide to create one – and  it materializes in no more than a couple of months. This hypothetical scenario has happened in reality many times, and the results of such developments are peppered across the Israeli ecosystem, and are highly indicative of its nature.

The various players and elements that make up the ecosystem are working creatively and in synergy –  one of the factors that enables Israel to be a leader in tech innovation. 

The State of the Israeli Innovation Space 

Start-Up Nation Central’s annual ecosystem report describes the state of the Israeli high-tech ecosystem as “in the midst of a period of strong growth.” At the end of 2018, it comprised more than 6600 active companies, over 500 multinational companies from 60+ countries, and more than 220 active hubs. It also seems that not only do people continue to come to Israel seeking tech innovation, but they are doing this more than ever. Record amounts of capital from both Israeli and foreign investors are flowing into Israeli high-tech companies, which has allowed many start-ups to grow their businesses, and remain independent in a way that was not possible a few years ago. 

Seed Rounds – Moving With the Times

The abundance described above does have a price. Seed rounds have grown in size, and companies are now finding that they really have to pull out all the stops, because investors expect far more. Gone are the days when it was enough to have a great idea, accompanied by a hopeful smile and a well-designed PowerPoint presentation. Now, Seed hopefuls need to show initial results, and demonstrate a much clearer, more detailed, and better-defined business model.

Growing and Maturing 

There is a clear trend of more and bigger growth rounds. Furthermore, there is a new layer of more mature growth companies, with more years in the ecosystem than a start-up, which continueto raise increasing sums of money, but which also remain independent and do not seek IPO or acquisition.  We have also seen the emerging trend of a new breed of entrepreneurs, who are striving to build large Israeli stand-alone companies. 

As a result, there has also been a dramatic increase in the involvement of multinational companies (MNCs) in the ecosystem, either directly, or through their venture arms. Non-Israeli corporations have become a lot more active in Israel in a broad and diverse manner, including establishing accelerators, having scouters on the ground, opening corporate venture arms and so on – rather than simply buying a company and opening an R&D center. MNCs are realizing that there is more than one way to work with Israeli start-ups and are consequently changing how they work with Israeli innovation, to increasingly engage in open innovation with the entire ecosystem, as well as, or instead of, acquiring a few Israeli start-ups. 

Click here to download your copy of the Start-Up Nation Central Annual Ecosystem Report 2019: Finder Insights Series – The State of the Israeli Ecosystem In 2018, and learn more about the story of the ecosystem in 2018, plus the context of growth over the past few years, including investments, investors, exits, companies, hubs, MNCs, technologies and more.