By Sara Miller, NoCamels -
The past year has been a period of great upheaval and uncertainty in Israel, yet the high-tech sector has proven steadfast, despite concerns over investment and durability and swathes of the workforce serving in the IDF reserves for long stretches at a time.
And as Israel navigates this time of war on multiple fronts – with its troops fighting in Gaza and Lebanon as well as handling attacks from Iran, Iraq, Syria and Yemen – NoCamels asked leaders in the sector to look forwards and share their thoughts on what the future holds for the national high-tech industry, whose strength and vitality earned the country the moniker “Startup Nation.”
Israeli readiness to embrace innovation, even when it seems somewhat risky, is a long-standing trait that is key to the sector thriving even in wartime – and crucial to it flourishing in the years to come, says Jon Medved, the CEO of Israel’s global investment powerhouse OurCrowd.
“The fact that Israel grows and it continues to grow its tech sector during war is sort of a core element of who we are,” Medved tells NoCamels.
“The reason that we’re so strong in the startup arena boils down, more than any other single reason, to our attitude towards risk. We are people who have learned to live with risk, even though I’m not sure we chose it.”
In agreement with this sentiment is Limor Nakar-Vincent, the Deputy Executive Director of Business at the Binational Industrial Research and Development Foundation (BIRD), a joint Israeli-American endeavor that brings companies from both countries together on collaborative projects.
Nakar-Vincent tells NoCamels that the decades of conflict that the country has endured has made its people hardy, and spurred innovation and development.
She cites the strong sense of solidarity and a highly adaptable workforce whose members often take on additional responsibilities to cover for colleagues called to reserve duty.
“Israelis are creative and deeply motivated, which helps them navigate challenging times,” she says. “[They] are accustomed to managing through cycles of tension, and historically, periods of growth follow.”
Going Global
Medved credits the diverse essence of Israel – a rich melting pot of Jews from around the world – with its ongoing and future success on the global stage. This “secret sauce,” he says, allows Israelis to retain ties, language skills and familiarity with global commerce and business on a broad scale – all of which are key, too, to its future success.
It is this global outreach that is crucial for investment in the sector in years to come, Medved says, as foreign investors are “the main part of the story in the Israeli Startup Nation ecosystem.”
In fact, he explains, even during the ongoing conflict, Israel reached a record high of 93-percent foreign VC participation in funding rounds for local startups, meaning that just 7 percent of them were solely Israeli efforts.
And as the sector looks to sustain itself and expand in years to come, Medved believes that in the next half decade or so, Israeli startups must now look beyond becoming a unicorn or decacorn (companies valued at $1 billion or $10 billion, respectively) and seek the attainable target of a $20, $50 or even $100 billion valuation, which means a more international approach.
“I predict that 10 years from now, there will be several Israeli companies in that $100 billion range,” he says.
Medtech veteran Mati Gill shares this sentiment, citing a trend of Israeli startups moving into the international arena rather than opting for what he calls “the classical ‘exit’ model” of selling to a larger entity.
“We saw a generation of Israeli startups that went public and grew globally, [while] maintaining their headquarters and R&D in Israel,” says Gill, who today is CEO of the Rehovot-based Aion Labs medtech venture studio, an initiative of the Israel Innovation Authority that works with global pharmaceutical giants on solutions for some of the most challenging diseases facing humanity.
In fact, Gill tells NoCamels, the expansion by Israeli startups into areas outside the classic tech and SaaS space into fields such deeptech and biotech has opened new opportunities for Israeli R&D to mature into industry solutions.
Staying Power
These new opportunities include making headway in the field of sustainability – one of the most innovative and significant in the tech ecosystem – which will create fresh avenues for Israeli startups in the years ahead. This, of course, is alongside other major areas like cybersecurity and fintech, in which local companies have already built a reputation.
“The double bottom line of impact investing – doing well and making money at the same time – is very valid and important,” says Medved.
“Whether it’s in healthcare or climate, access to disabled technologies, foodtech or agtech, transportation, education or financial inclusion, you will see large numbers of Israeli startups on the front lines of this important battleground.”
Gill, who has worked extensively in medtech innovation, also believes that healthcare – which he describes as the meeting point of technology and life sciences – is an area in which Israel is “uniquely positioned” to become one of the most relevant and leading ecosystems.
“Our strong research and talent capabilities in both sectors, coupled with the entrepreneurial mindset of Israelis have helped birth a new cluster of startups in the tech bio space in Israel,” he explains.
This includes significant fundraising achievements, deals and increased interest from pharmaceutical multinational corporations in the past five years alone, he adds.
Medved also highlights the need to ensure that Israeli innovation in these extremely important areas is made available in “every corner of the planet,” regardless of how economically developed a country is.
To this end, he says, OurCrowd has partnered with the World Health Organization Foundation on a $200 million Global Health Equity Fund to help make these technological advances more equitable.
Meanwhile, says Nakar-Vincent, the ongoing war will likely lead to growth among companies focusing on dual-use technologies, which serve both civilian and military applications.
“This sector has garnered heightened interest, leading to increased funding and expedited development processes,” she says.
In fact, she adds, the experience gained by many Israelis now serving in reserve duty will nurture the establishment of new start-ups in the defense and homeland security spheres.
“It’s essential to consider various forms of support for high-tech companies, especially those facing the ‘valley of death’ but with the potential to commercialize their technologies,” she explains.
Looking beyond new innovation to the challenges of maintaining its well-respected position in the world’s tech sector, Gill believes that regulatory and geopolitical stability are vital, as well as restored trust in the country’s leadership and maintaining an independent judiciary.
The latter refers to the domestic political turmoil over proposed judicial reform in the months preceding the October 7, 2023 mass terror attack by Hamas that saw tens of thousands taking to the streets every week to protest.
Equally important, Gill says, is the ability to produce experienced homegrown talent in the sector and the ability to attract talent from abroad to Israel.
Medved ties expansion in Israeli high-tech to the need to find novel ways of raising money, in particular for startups in the field of artificial intelligence, which Israeli angel investor and former military intelligence officer Alon Arvatz predicted last year would be accelerated due to its use by the army in the current war.
“It turns out that to build these AI startups fast, you need a lot of capital and a lot of money for computing and for GPU farms,” Medved says, referring to sophisticated servers that can quickly perform complex calculations.
Ultimately, say both Medved and Gill, it is experiences of extreme challenge that makes Israelis creative, progressive and determined to succeed, and will continue to do so in the future.
“We are great as a country at staying focused on what matters, delivering results no matter what and adapting to any circumstances – especially when our backs are against the wall,” declares Gill.
“It’s unfortunately been part of our environment for thousands of years that our risk of survival is simply part of the nature of our society,” says Medved.
“As a result, we don’t stop creating. We don’t stop celebrating. We move forward with laughter through tears, and if they think they can stop us, they can’t.”
