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Israel, a country recognized as the global hub of the startup ecosystem, is going through tough times. On October 7, the country was hit by a terrorist attack led by the Palestinian Hamas. The war has been going on for two weeks now, and it is too early to draw conclusions about the decades-long conflict. From the point of view of the technological business environment, it can be said that this is a strong segment that has what it takes to maintain its global position, even in the light of challenges.
Before the October attacks, Israel’s high-tech ecosystem, along with the global tech space, was already suffering from rising US interest rates, which reduced liquidity and made financing more expensive.
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The positive point when we talk about funding is that over the last decade, Israeli startups and venture capital funds have been able to take advantage of the phase of low interest rates and more available money. So, with thousands of dollars invested, a good mattress could be created to survive in the current global scenario. Israeli startups attracted US$15 billion in investments in 2022, the second best year after 2021, according to data from research firm IVC.
However, it is important to emphasize that it may be difficult to attract venture capital for these startups in the future, at least until we have more clarity on geopolitical issues.
The still very good performance of Israeli startups is also explained by the fact that we are talking about global companies that are able to offer their products and services to the whole world. This resilience, added to human talent—the prime mover of Israel’s technological locomotive—is making a difference in the face of the country’s political and economic challenges. The remote work model, widely adopted by tech companies after the pandemic and especially in Israel, is helping to improve work solutions.
In the face of conflict, Israel’s tech sector is also committed to the society in which it operates. Some companies, for example, offer their services for free to help the public in some way. Moreover, those with the most advanced technology have cooperated in the search for civilians taken hostage by Hamas.
Importance for global technology
Concerns about the current state of Israel’s startup ecosystem are legitimate, considering that we are talking about global importance and protagonism. These are companies that are very well integrated with the rest of the world, working in collaboration with the largest companies.
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A very practical example of this scenario is present in Waze. There are certainly Brazilian and other drivers in various countries who are very grateful for the GPS navigation software developed in Israel and acquired by Google in 2013.
Another strong influence of the Israeli technology segment that can be identified in Brazil is agricultural technology, known as AG Tech. The country has developed advanced irrigation techniques, drought-tolerant crops and precision agriculture solutions that help address global food security and sustainable development challenges.
And of course, you can’t talk about technology without commenting on artificial intelligence, always associated with manufacturers like Nvidia. But before that there was Mellanox, an Israeli company that has played a significant role in the adoption of artificial intelligence and provides the necessary high-performance solutions that support the scalability of artificial intelligence and machine learning data. It was acquired by Nvidia in 2019 for US$6.9 billion.
Israel’s technological segment also plays an important role in the country’s defense, thanks to the development of the Iron Dome, the famous dome capable of shooting down missiles, rockets and other types of projectiles before they reach the country’s soil. It is a system that is attracting interest even in other countries, as it has already helped save many lives in its country of origin.
There are also Israeli companies listed on Nasdaq, such as Monday, known for its team and workflow management system, Nice, a multinational software company specializing in customer experience management, financial crime prevention and compliance solutions; and Camtek, which develops automated control and metrology equipment used in the semiconductor and electronics industries.
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All the companies mentioned are startups that were born in Israel and are now traded on the largest capital market in the world, all with above-average results.
Now faced with an armed conflict scenario, it remains to be seen what the future holds for these and other exceptional companies, as investment in them, as well as exports and access to international markets, also depend on a peaceful solution.
An estimated 10% to 15% of Israeli startup teams are among the 360,000 reservists called up to fight in the conflict, a huge impact for relatively small companies, according to information from Financial Times.
* Ilan Furman, CIO at Bridgewise, an Israeli tech startup that provides AI-powered fundamental stock analysis, which is backed by L4 Venture Builder, a corporate venture capital fund with B3.
