Inside Israel’s Thriving Tech Sector:  How a Nation Earned Its Reputation as the Startup Nation

Israel’s technology sector has been thriving in recent years.  The country has earned a reputation as a Startup Nation, receiving twenty-eight times more capital flow than the United States in 2021 on a per capita basis.  Israel’s high-tech companies raised $14.95 billion through 663 deals in 2022, with fifty-seven Israeli companies going public and raising $4 billion.  Israeli cybersecurity startups alone raised $8.8 billion, more than triple the amount raised in 2020.  

Israel invests 4.1% of its gross domestic product into research and development, which is twice the OECD average.  It is ranked number two in the world for research and development expenditure per capita, and number three for the number of AI and machine learning startups.  Israel is also home to one-third of the world’s cybersecurity unicorns.  Israel has been successful in creating a haven for entrepreneurs and innovators through various government programs and tax incentives.  Small local markets and security threats forced Israeli entrepreneurs to operate globally.  Additionally, the elite cybersecurity intelligence unit, Unit 8200, produced a group of world-class cybersecurity experts with the talent to start companies.  

Furthermore, Yozma, a government program launched in 1983, matched outside venture capitalist investments in Israeli startups, asked venture capitalist firms to return their investment if the company had a successful exit, and has been a major factor in Israel’s business success.  There are more than thirty grants and tax incentive programs for research and development, including employment aid programs, tax incentives, and intellectual property incentives.  The Abraham Accords, signed on September 15, 2020, normalized relations with the United Arab Emirates and, a few weeks later, with the Kingdom of Bahrain.  This agreement extended Israel’s economic relationships in the Middle East and could create 150,000 new jobs for the four signatories.  If the accords grow to include eleven nations, the impact could be more than four million jobs and more than $1 trillion in new economic activity.