Israel is a country well-known for its innovation-driven economy. As the saying goes, in Israel you are either an entrepreneur or an investor. Spend a few days there and you will see what I mean.
While the factors that have fostered a start-up boom are many there is no denying the fact that Israel is unique when it comes to entrepreneurship relative to its small population. Many of the biggest global VCs have offices in Israel and most big-techs have established a presence as ignoring the ecosystem is at your own risk.
Recently, IVC Research Center, in partnership with ZAG-S&W Law Firm, published a report on venture funding of tech in Israel covering 2019. Overall, tech investment in Israel crushed it in 2019.
According to the report:
Israeli tech sums up 2019 with a record high of $8.3 billion in capital funding. The number of transactions in 2019, 522 funding deals, remained at the same level as 2018. The broad picture reveals the magnitude of the change in local high-tech over the last decade. The total amount per annum rose 4-fold with the number of deals growing 64% since 2010. Median and average numbers explain where the money went: much bigger deals and on an unprecedented scale. [emphasis added]
In 2018, tech firms in Israel raised “just” $6.353 billion. In 2017, tech firms raised $4.857 billion.
The growth of tech investment has been spectacular – for a country with a population of 8.7 million – less than the state of Ohio.
If you compare Israel to a developed country with a well established VC sector and global tech firms like the United Kingdom, you start to get a better idea just how big of a home run Israel’s tech sector is.
During 2019, the UK saw $13.2 billion invested in early-stage tech (£10.1bn). The UK has a population of 66.5 million. Do the math yourself. Per capita, Israel is killing it.
While the “innovation nation” is a standout in tech, what about Fintech? Or innovations in financial services – a red hot sector of early-stage venture capital.
IVC reports that $1.732 billion was invested in Israeli Fintechs during 2019. This is more than double versus the year prior when only $880 million flowed into Israeli Fintechs.
Investment in Israeli Fintechs benefited from some very large funding rounds. In fact, IVC reports that four of the largest deals were over $100 million – nine deals raised over $50 million. Think of names like Insurtech Lemonade that raised a mere $300 million or NextInsurance at $250 million.
Another point in its favor is the fact that Israel is home to the largest investment crowdfunding platform in the world.
OurCrowd has booked over a billion dollars in capital commitments since platform launch. Exits now number dozens.
While OurCrowd is a global investment marketplace a good number of their portfolio companies are Israel based. More than 39,000 individual investors are registered on the platform from 180+ different countries.
Israel’s success is something many other countries are trying to emulate. Key to its success is a highly educated population that is willing to shoulder risk (as many startups fail). This tolerance for risk must be combined with access to capital. For the moment, Israel has it all and Fintech and other tech sectors are the beneficiaries.