The success of Israel in the field of high-tech innovation is unrivaled. It is remarkable, to say the least, so remarkable that there is a growing number of books published on the subject.
One of the most notable of such books is “Start-up Nation: The Story of Israel’s Economic Miracle.” And the word miracle is apt for Israel’s success, as demonstrated by this quote from a publication by the Council for Foreign Relations, a US think tank:
“How is it that Israel—a country of 7.1 million people, only sixty years old, surrounded by enemies, in a constant state of war since its founding, with no natural resources—produces more start-up companies on a per capita basis than large, peaceful, and stable nations and regions like Japan, China, India, Korea, Canada, and all of Europe?”
While this astounding success is attributed to a number of factors, including immigration and government support, it has been greatly influenced by the thriving venture capital Israel scene.
The Role of Venture Capital In Israel’s Thriving High-Tech Industry
The venture capital Israel scene has continued to reach new heights of success and the latest statistics from the Israeli Research Center are staggering:
- The total value of mergers, acquisitions, buyouts, and IPOs involving Israeli companies in 2021 was $22.2 billion. This was from 238 deals.
- In 2021, venture capital Israel investment was $25.6 billion. This figure saw a 150% increase from the previous year.
- In 2021, a total of 28 Israeli companies achieved unicorn status. This was a 200% increase from 2020.
- Israeli startups are so attractive that Israel is a net seller, with most of its startups being acquired by American companies. Moreover, Israeli companies are considered more popular than their American counterparts, which is no mean feat.
Venture capital in Israel is booming, which has had a significant impact on investments in the country. According to Crunchbase, in 2021, Israel ranked second worldwide in terms of startup investment per capita.
For startups in Israel, one of the most convenient ways to secure funding is to approach an Israeli venture capital company, of which there are many. There are about 276 venture capital firms in Israel. They have made it easier for Israeli startups to secure funding, directly impacting the number of high-value products and services that the country develops.
How Did the Venture Capital Scene in Israel Develop?
One of the major factors in the growth of the nascent venture capital scene in Israel was government intervention. In 1993, the government launched the Yozma program, which offered mouth-watering incentives to promote foreign venture capital investment in Israel. It also committed to doubling any investments made.
These measures by the government had a significant impact:
- In the span of a decade, venture capital outlays in Israel rose 60 times, from $58 million to $3.3 billion.
- The number of startups launched with the help of an Israeli venture capital company rose from 100 to 800.
- The revenues of Israel’s information technology industry rose from $1.6 billion to $12.5 billion.
- In 1999, Israel had the highest share of growth attributed to the high-tech industry globally: 70 percent.
Conclusion
The thriving venture capital scene in Israel has had a significant impact on Israel’s economic success. The country has the second-highest number of start-ups in the world and the third-highest number of companies listed on the NASDAQ stock exchange.
This burst in the number of startups and high-tech companies can be directly attributed to the relative ease of financing enabled by the more than 200 venture capital firms in the country.