By Stephen Scheer
JERUSALEM (Reuters) – Israel’s high-tech sector now accounts for 20 percent of the country’s economic output, the Israel Innovation Authority (IIA) said on Tuesday, calling on the government to increase investment to fuel the sector’s growth.
In its 2024 Israeli High-Tech Sector Status Report, state officials said the sector continues to grow, albeit slower than in 2021 and 2022, and remains Israel’s main growth driver despite the eight-month-old war with Palestinian Islamic organization Hamas in the Gaza Strip. The high-tech sector accounts for 53% of total exports.
Nearly 600 startups were founded last year, and technology companies are expected to raise $8 billion in 2023, down 55% from 2022. In total, Israel is home to about 9,200 technology companies, employing 400,000 people.
IAA chief executive Dror Binh said the budget had been expanded to support a total of $250 million effort to help start-ups struggling to raise capital due to the war and a tough global funding environment, but states needed to “double down” on technology investments.
“Israel doesn’t have many natural resources. We’re not an oil or gas superpower,” Bin told Reuters. “We’re a country on the brink of desertification, so we don’t have much water. The only natural resource we have are the grey cells in the brains of people here. We have to make sure that these brains continue to thrive and continue to grow.”
Gamliel agreed that innovation is Israel’s most important resource and that the government “must continue to support companies and develop the necessary infrastructure.”
Bin expects 2024 to be a similar year to last year due to uncertainty around fundraising rounds, but foreign investors remain active because they know how to assess the risks of investing in Israel and want to invest while valuations are attractive. He said he would like to see more Israelis invest.
While cyber and fintech remain the hottest areas for investors, climate change tech now accounts for one in six new startups as entrepreneurs seek to solve “the challenges facing a warming planet and how to provide food, water and quality health care to an ageing population,” he said.
He noted that about 8% of technology workers have been called up into the Army Reserves, and others have been pulled from their comfort zones to volunteer.
As a result, they met new people and saw many civilian and defense needs.
“After the war, because of all the crazy things that have happened in Israel since Oct. 7, there will be a baby boom of startups in Israel,” Bin said.
(Reporting by Stephen Shea and Hugh Lawson Editing)
