Israel, often referred to as the “Startup Nation,” has long been a beacon of innovation and technological advancement. But what exactly keeps Israel at the forefront of global tech, especially in a rapidly evolving world? Hanan Brand, Vice President of Startups at the Israel Innovation Authority (IIA), shares his insights into how Israel has maintained its position and what challenges lie ahead, in this IsraelTech interview with Yoel Israel.
A Unique Government-Backed but Independent Entity
The Israel Innovation Authority stands out as a unique entity in the global tech landscape. Despite being a public body funded by taxpayer money, it operates with a high degree of independence. “We are completely independent in our decisions,” says Brand. This independence allows the IIA to make decisions based on the needs of the industry rather than political influences, ensuring that investments are made where they can have the most impact on Israel’s economy.
The IIA invests approximately $500 million annually into Israeli technology and startups, selecting between 800 to 1,000 companies out of 3,000 applications each year. Unlike venture capital firms, the IIA doesn’t seek equity or control over the companies it funds. “Our investment is completely equity-free,” Brand explains. Instead, the focus is on creating jobs, fostering innovation, and ensuring the long-term growth of the Israeli economy.
Fostering Innovation in Emerging Sectors
While cybersecurity, fintech, and SaaS continue to dominate Israel’s tech scene, the IIA is looking to diversify the country’s tech portfolio. “We are actually looking to invest in areas where there’s a lack of money,” says Brand. The IIA is keen on mitigating risks for investors in underfunded sectors such as quantum computing, artificial intelligence, bioconvergence, and climate tech. These are areas where Israel has the potential to become a global leader, but they require significant investment and support to flourish.
Brand highlights the importance of long-term thinking, something that is often missing in both the private and public sectors. “We have a job to look at Israel 5, 10, 15 years from today,” he says. This forward-thinking approach is crucial in ensuring that Israel remains competitive on the global stage, particularly as other regions like Paris, London, and Singapore rapidly develop their own tech ecosystems.
Addressing the Challenge of Diversity
One of the most significant challenges facing Israel’s tech industry is diversity—or the lack thereof. Brand identifies this as a critical issue, not just in terms of gender and ethnicity but also geographically. “We believe startups can come from everywhere,” he asserts. To address this, the IIA has launched various programs to increase the participation of women, ultra-Orthodox Jews, and Arabs in the tech sector. These initiatives are crucial for tapping into the full potential of Israel’s population and ensuring that the tech industry remains inclusive and dynamic.
Geographic diversity is another focus area. Most tech activity is concentrated in Tel Aviv, but the IIA is working to support startups in other regions like the North and South of Israel. This includes investing in infrastructure, such as offices and transportation, to make it easier for startups to grow and thrive outside the central hub.
The Importance of Long-Term Investment and Growth
Brand acknowledges that while Israel has succeeded in scaling up from a startup nation to a scale-up nation, there is still work to be done. The number of new startups being founded each year has decreased significantly, from 1,400 in 2014 to just 600 today. This decline is a concern because the creation of new startups is essential for maintaining a vibrant and innovative ecosystem.
To counter this trend, the IIA is focusing on fostering new startups through initiatives like the Ideation Fund, which provides $70,000 to promising ideas even before a company is formally established. “We believe in the theory of the home run,” says Brand, emphasizing that the more startups there are, the higher the chance of creating successful companies that can make a significant impact on the global stage.
The Future of Israeli Tech
Despite the challenges, Brand remains optimistic about the future of Israeli tech. He notes that even during difficult times, Israel’s tech industry has shown resilience. Major companies like Nvidia and Intel have praised the country’s ability to meet milestones, even in the face of adversity. “Everyone believes in Israel. Even during these tough times, the brand is still strong,” Brand affirms.
Looking ahead, Brand sees a shift towards deeper technologies, with more investments in areas like semiconductors, energy, and biotech. He believes that Israel has the potential to lead in these sectors, provided there is continued support from both the government and the private sector.
Conclusion
Israel’s success as a tech innovation hub is no accident. It is the result of strategic investments, forward-thinking policies, and a commitment to fostering diversity and long-term growth. With the continued efforts of organizations like the Israel Innovation Authority, the country is well-positioned to remain at the forefront of global technological innovation.
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