We are fortunate to sit in one of the “hottest” technology and innovation hubs in the world. With more than 6,000 active startups and an economy dominated by the high-tech industry and entrepreneurship, Israel has certainly earned the nickname “Startup Nation.” Our goal at Deloitte is to scale the local ecosystem, both within Deloitte and with our global clients.
Disruptive innovation in various industries is rapidly changing the global business landscape, creating new challenges and opportunities for businesses. Traditional business models are at risk of becoming obsolete if they do not evolve at the same pace. Israel’s unique ecosystem is very successful in meeting the needs brought about by these constant changes.
Israel is a business powerhouse and a hotbed for pioneering technologies, profitable business opportunities and high returns on investment. For these reasons, it is not surprising that the world’s leading multinational companies choose Israel: Microsoft, Motorola , Google , Apple (three R&D centers), Facebook , Berkshire-Hathaway , Intel , HP, Siemens , GE, IBM, Philips , Lucent , AOL, Cisco , Applied Materials , IBM, J&J, EMC and Toshiba are just some of the names on a long list of more than 200 MNCs that have realized that Israel is their ideal investment opportunity
Furthermore, many multinational corporations such as Tata, Kodak, Citi bank and many others have established innovation centers in Israel.
So how does Israel manage to stay at the forefront of technology in so many different fields? Furthermore, what makes it so unique that many international players come and look for the next innovation here?
Israel’s unique society and culture, strong economy, government support, and “global-first” approach to the market are just some of the factors that make Israel’s innovation ecosystem one of the most successful ecosystems in the world. In 2016 alone, Israeli startups raised a record 4.8 billion USD from investors, while startups and high-tech companies sold for 10.02 billion USD through acquisition or IPO. Israel is also home to the highest number of engineers per capita and has the second highest R&D expenditure in the world as a percentage of GDP (4.3%).
Additional attributes of the Israeli ecosystem include:
Highly innovative -Israel is internationally renowned as the “startup nation” and leads the world in the number of startups per capita—with 2,000 startups founded in the past decade, 3,000 other small and medium enterprises and high-tech companies, 30 growth companies, 50 large technology companies and 300 R&D centers of multinational corporations. Profit-driven Israeli innovations include a long list of firsts in the market such as drive-on-key technology, IP phones, ZIP compression, swallowable pill-sized cameras, etc.
Strong R&D Capabilities – Israel ranks second in the world in terms of R&D spending per capita. Israel invests about 4.1% of GDP in R&D, the OECD average of 2%.
Educated and skilled workforce – Israel has the highest per capita ratio of engineers and scientists in the world, and one of the countries with the highest average ratio of university degrees and academic publications highest head. Israel has a high-quality education system and is one of the best-educated societies in the world.
Due to mandatory military service, young people received advanced technical training during their military service and acquired a high sense of responsibility and success orientation. On top of that, Israel has experienced several waves of immigration by scholars from around the world. Israel’s innovative, skilled and ambitious workforce is one of the most obvious reasons why executives are turning to Israel for business. In fact, Israel boasts one of the most highly educated, entrepreneurial and multicultural workforces in the world, creating innovative technologies, innovations and research products. applied globally and in the fields.
Government Support – The Israeli government established the Technology Incubator program in the early 1990s. Today there are more than 25 incubators across the country, all of which have been privatized. Incubators provide government funding of up to 85% of early-stage project costs for two years. They nurture companies from seed to early stage, thereby minimizing investor risk. To date, more than 1100 projects have graduated from incubators, with more than 45% successfully attracting additional investments from various investors.
Furthermore, the Israel Innovation Authority offers many support programs with an annual budget of approximately $400 million. The main program is the R&D Fund, which provides R&D grants of up to 40% of approved R&D program costs.
Other programs run by the IIA include binational funds (joint R&D programs with foreign partners such as China, Canada, USA, etc.) , which are entitled to financial support of 50% of R&D costs of the Israeli company.
Investment support – The Investment Law allows foreign companies to benefit from reduced corporate tax rates and investment subsidies. Another incentive program offered by the government is employment subsidies for R&D centers and large enterprises. The program offers a four-year funding plan that covers an average of 25% of the employer’s payroll costs for each new employee.
VC Industry – Israel’s burgeoning startup industry is complimented by a flourishing venture capital market. Israel’s venture capital industry has about 70 active venture capital funds, 14 of which are international venture capital funds with offices in Israel. Far exceeding any other country in the number of VCs per capita, Israel’s availability of venture capital symbolizes the breath of innovation industries and the highly efficient financial sector that makes foundation for them.
A flexible, innovative economy – Flexibility and the ability to adapt to change are considered key factors affecting business performance. In fact, the IMD World Competitiveness Index places this attribute among the top indicators of economic competitiveness. Creativity and flexibility fuel innovation, and the ability to respond to a changing business environment is critical for businesses to thrive in today’s dynamic global marketplace . Israel’s ability to quickly translate market demand into organizational action explains its continued strong performance on the agility index and its widespread acceptance as an innovation capital.
Nissim de Babani
Nissim is the VP of Marketing and Co-Founder of Global Citizens Technologies, an outsourcing company based in Ho Chi Minh City, Vietnam. He believes in connecting cultures and technologies and spent most of his adult life in Canada, Israel and Vietnam to realize this vision. He has more than 15 years of business experience in these areas. He is an entrepreneur and investor, and his passion is business development in the technology startup environment. He can’t start his day without mint tea and he loves spending time traveling with his children.