Israel hi-tech ecosystem is moving from startup to scale up, says GlobalData

Israeli hi-tech startups are increasingly keen on organic means to scale up into global markets over quick exit to international companies through mergers and acquisitions (M&A). The trend will result in the growth of large home grown multinational companies and become core to the country’s economic growth in future, says GlobalData, a leading data and analytics company.

Israel is one of the dominant leaders in the entrepreneurial world by the virtue of its hi-tech achievements over the years. The country has 95 companies listed on the Nasdaq stock exchange, next only to the US and China. With Tel Aviv as the center of attraction, Israel’s startup per capita stands at the largest worldwide.

Archi Dasgupta, Disruptive Tech Analyst at GlobalData, says: “The nation is often blamed for building startups without defined direction leading to many failures. Close to 1,000 startups across industries are estimated to emerge in the country each year where majority of them end up with little success. Hence the burning question – Can Israel change its identity from a startup nation to a scale up nation?”

An analysis of GlobalData’s Disruptor Database reveals some interesting changes in the innovative journey of Israel’s hi-tech ecosystem. The number of startup exits to M&A has fallen by 16% to just over 50 during 2015-2018.

In addition, the number of $10m-$20m venture capital funding rounds in startups (generally considered scale up rounds indicating a maturing ecosystem) recorded a growth of 18% in 2018 compared to 2015. The amount raised in the same funding band increased by nearly 20% from fewer deals compared to 2015. More money pumped in to the startups from fewer deals indicates resilience and potential around them.

The current trends indicate that Israeli entrepreneurs are ambitious to build up their companies on the home ground, while investors are more and more confident with betting their money on growing Israeli startups.

Dasgupta adds: “Devising promising strategies from now will be crucial for the country in achieving the scale up status. For instance, Israeli startups considering partnerships with multinational companies (MNCs) can be a great start to get help in the countries looking for expansion. Currently, there are more than 250 MNCs, including big names such as Google, Apple and Facebook, in Israel.”

As the ecosystem continues to grow, Israel will celebrate a scale up status as well as continuing to be the magnet for startups, which is considered value for the economy.

Dasgupta concludes: “Beneath the seamless potential, however, are some challenges to the nation’s hi-tech industry. The major one comes in the form of talent crunch as the demand is double the number of skilled workers. Quick actions to widen the pool of skilled personnel, such as launching coding bootcamps to expedite trained workers to the market and recruiting talent from overseas, can help Israel sustain the growth and achieve the status of a scale up nation.”

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