Israel continues to reap tech dividends

Israel’s booming tech and start-up ecosystem is looking beyond the latest round of elections with renewed optimism, as candidates across the political spectrum endorsed the industry regardless of their political leaning.

“In this country, there is a broad consensus on economics,” Jon Medved, CEO and founder of OurCrowd, told local daily newspaper the Jerusalem Post in the aftermath of the elections. “Everyone wants to wrap themselves up in the mantle of the start-up nation; it’s almost like Israeli-style motherhood and apple pie.”

Business not an issue

Israel held a general election to renew the Knesset, the country’s parliament, on April 9. Early results (at time of going to press) indicate incumbent prime minister Benjamin Netanyahu may have clinched a fifth term at the head of the national government as his Likud party won a slight majority of votes over the centrist opposition, the White and Blue Alliance, and is expected to have the numbers to form a centre-right coalition.

If candidates clashed over different issues in the campaign leading up to the elections, including growth models and social inequality, business was barely mentioned.

"During the elections, nobody was talking about real changes in business policy,” said Mr Medved. “It just wasn’t an issue in the elections. The elections were about other things, about personalities, legal issues, peace and security, as they always are.”

Golden decade

Israel’s economy has experienced strong growth in the past 10 years, even pushing some to refer to it as a 'golden decade'. In February 2019, credit rating agency S&P said in a note: “Israel’s economy continues to thrive and benefit from diversification, with high-value-added manufacturing and services sectors, especially in the information technology industry.

“The ICT sector contributes more than 8% of the gross value added, and scientific and technical activities about 3%. This is underpinned by sizeable expenditures on R&D, exceeding 4.5% of GDP on average – the highest among member countries of the OECD.”

Israel has nurtured its ecosystem of start-ups and entrepreneurs to become a world-renowned hotspot for technological development in fields such as cybersecurity and ICT.

There are as many as 18 unicorn companies (privately held start-ups with a valuation of more than $1bn) that originated in the Israeli start-up ecosystem, according to figures from research company CB Insights. Most were launched by Israeli citizens but are headquartered outside the country, as is the case with WeWork, the co-working company launched by Adam Neumann. Such examples have led to some to suggest that Israel should upgrade from its current status of 'start-up nation' to that of 'scale-up nation'. 

Chipping away

Israel’s growing tech knowhow has also lured dozens of foreign investors. US chipmaker Intel has led the pack with multibillion-dollar investments in facilities across the country. The company unveiled an $11bn investment in a new facility in January that will bring the headcount of its local workforce to about 15,000. Chipmakers have been by far and large the most active foreign investors in the country value-wise in the past decade, with announced greenfield projects of more than $16bn according to figures from greenfield investment monitor fDi Markets. Investors from in the software and IT service sectors have announced the highest number of projects, at 134.

The strength of the country’s tech sector is propelling Israel’s economy way beyond the long-standing security and corruption tensions that Mr Netanyahu may have to deal with as he begins his new term.