By Steven Scheer
JERUSALEM (Reuters) – Israel’s high-tech sector now accounts for 20% of the country’s economic output, the Israel Innovation Authority (IIA) said on Tuesday as it urged the government to invest more to allow technology to grow faster .
In its 2024 report on the State of Israel’s High-Tech Sector, the state-funded authority said that despite the eight-month war against the Palestinian Islamist group Hamas in Gaza, the technology sector continues to grow – albeit more slowly than in 2021 and 2022 – and remains the main driver of Israel’s growth. It constitutes 53% of total exports.
About 600 new startups were created last year while tech firms raised $8 billion in 2023, down 55% from 2022. In total, Israel has about 9,200 tech firms with a workforce of 400,000.
Dror Bin, chief executive of the IAA, said that while its budget has been increased to help fund initiatives totaling $250 million to help startups that have trouble raising money because of the war and an environment of difficult global financing, the state must “double” the technology. investments.
“Israel does not have a lot of natural resources – we are not an oil and gas superpower,” Bin told Reuters.
“We’re a country on the brink of a desert, so we don’t have a lot of water. The only natural resource we have is the gray cells in people’s brains here, and we need to make sure that continues to thrive and grow.”
Innovation, Science and Technology Minister Gamliel agreed that innovation is Israel’s most important resource and that the government “must continue to support companies and develop the necessary infrastructure.”
A separate survey by Israel’s Advanced Technology Industries on the impact of the Israel-Hamas war on the technology sector showed that 65% of venture capital funds reported difficulty operating due to identifying as Israeli, and more than 30% of Israeli companies and startups have moved significant activity abroad – and this could worsen in the coming year.
Bin predicts a similar year in 2024 to last year due to anxiety over funding rounds, but foreigners are still active investors as they know how to assess the risks of investing in Israel and want to invest while valuations remain attractive. He said he would like to see more Israelis invest.
Cyber and fintech remain the hottest sectors for investors, but climate tech accounts for one in six new startups as entrepreneurs seek to solve the challenges facing a “warming planet and how to provide food, water, good health care services in an aging population,” he said.
About 8% of tech workers were called up for military reserve duty, while others also pulled out of their comfort zones to volunteer, he noted.
As a result, they met new people and saw a host of civilian and defense needs.
“After the war,” Bin said, “we’re going to see a startup baby boom in Israel because of all these crazy things that have happened here since October 7.”
(Reporting by Steven Scheer; Editing by Hugh Lawson and Emelia Sithole-Matarise)
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