Swaying away from Silicon Valley and the exponentially growing European tech-hub – Berlin; Israel is like a dark horse that has the potential to actively compete and collaborate with other ‘startup nations’ around the world. With a focus and investment of over 4% of its GDP on corporate R&D, Israel has focused on driving its economy by creating an environment to harness tech startups and VCs. According to a 2014 report, Israel has nurtured over 5000 tech firms, making it an ‘exit nation’ for VCs and angel investors. Furthermore, its tech sales and IPOs have hit the $15 billion mark.
While Israel is often in the news for its military powerhouse, political conflicts and the Tel Aviv diamond cluster, its digital and IT innovation in several verticals is at the forefront of its economy. Sectors like Tel Aviv, Ra’anana, Petak Tikva and Netanya have formed to be technology and innovation focused clusters in the country. According to OECD data, Israel’s information and communication technology accounts for over 20% of total industrial output and over 9% of private sector employment. Furthermore, according to Bloomberg’s Innovation Index, Israel is the fifth most innovative country in the world, a step ahead of the United States.
Innovation is a need more than a want in the country due to its lack of natural resources and also because it is surrounded by enemies. Due to this, Israel is focused on a self-reliant economy while also building powerful relationship with developed nations in the western hemisphere.
Its necessity on self-reliance and lack of natural resources has motivated the government to intervene and government play a major role in nurturing tech startups and VCs in the country. Along with an existence of Chutzpah (audacity to take risks) in the corporate culture, tax benefits for Investors, low interest rates on infrastructure and streamlined immigration has harnessed a startup ecosystem known as Silicon Wadi. This has led to an influx of over a billion dollars solely through VC funds in the last year. Innovation specifically in intelligence, medical equipment and ICT leads the startup ecosystem within the country.
Furthermore, with the United States being free-trade allies of Israel and Germany’s recent visa and entrepreneurial agreement of collaboration, Israel is on the verge of creating over 100,000 new jobs along with a focus on Digitalisation.
Along with governmental support, something that forms Israel as an apt innovative knowledge network is its close collaboration with academics and the population. While the entire ecosystem has been integrated with state-of-the art research centres and poly-tech institutions in Tel Aviv and in the academic city of Rehovot, local population’s mandatory military training and service has infused a sense of familiarisation and expertise in sensitive technology since they are trained to use them in the military. This forms a network of tacit knowledge in the country which is strongly contributing to the efficiency and quantity of innovative products and services being produced.
Therefore, the strongly integrated knowledge network has put Israel as a frontrunner of innovation with a shift in tech trajectory from the Silicon Valley to the ‘Silicon Wadi’.