The Startup Ecosystem of Israel

Israel is known as the startup nation for a good reason; it’s a small country which still manages to leave a substantial mark on the global startup ecosystem. The Israeli startup ecosystem has not only survived but thrived in multiple challenges over the years. Most of those challenges have been external, and seem to have only increased the Israeli ecosystem potency and ability to innovate. This year, however, the situation is very different, as the nation's startup ecosystem is faced with a challenge from within. The controversial proposal for a judicial overhaul threatens to impact investment in the country's startup ecosystem and break the trust between the country and its entrepreneurs. Regardless of the need for judicial reform, the way it has been introduced has infuriated the vast majority of the Israeli tech scene and its entrepreneurs. It is extremely rare to see a country that blatantly engages in policies which alienate the majority of its most successful entrepreneurs. It is worthwhile for the same decision makers who until recently successfully promoted the narrative of the “Startup Nation” to make sure they are not taking steps that will be almost impossible for the ecosystem to recover from in the foreseeable future. Israeli entrepreneurs are targeting a global market, and can easily relocate to other ecosystems if pushed to do so. It should be noted, however, that the civil backlash caused by the proposed overhaul was so powerful that it resulted in delay, showing how vibrant and strong Israel’s democracy is.

In spite of its turbulence through the years, the Israeli ecosystem is truly outstanding. Per capita, the number of unicorns started by Israeli founders is the highest in the world. The mystery of the Israeli ecosystem’s success is best explained by Uri Adoni in his book “The Unstoppable Startup.” In a nutshell, Israeli entrepreneurs have chutzpah, which is defined as "The challenging and the defiance of the prevailing order."

This reflects a massive gap between the quality of local entrepreneurs and the ability of public sector policy makers to create an environment that encourages vibrant startup ecosystems. In the last decade, there have been some positive signs that this gap can be narrowed, and if it will, Israel has a massive potential to produce a substantially better startup ecosystem than it has already.

Recent decades in Israel showcase how startups can transform a low productivity, developing economy into a high efficiency, developed economy. The Israeli startup ecosystem is a cash cow, generating tax revenue for the country both from exits and high salaries. Israeli apps like Waze, Wix, Fiverr, and Viber have made their mark around the world, but a few, like Mobileye (sold to Intel for US$ 15 billion), are the hidden powerhouses within the ecosystem. There is a wide variety of industries where Israel excels, including autonomous driving (Mobileye, Waze), advertising (Taboola), and services (Fiverr). One maturing industry that shows substantial potential is cybersecurity, leveraging the unique challenges that the Israeli army faces.

We believe that Israel relies on an important ingredient: the quality and mindset of its entrepreneurs. As long as the country manages to keep them happy, the Israeli ecosystem should continue to thrive.