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A critical mass of
mega-valued global tech companies based in Israel may create a whole new local
ecosystem in the coming years
By SHOSHANNA SOLOMON 3 November 2021, 3:08 pm
The face of Israel’s future economy will be
completely different from that of previous decades, experts say, because of a
critical mass of billion-dollar tech companies, or unicorns, that have
flourished within its borders.
“What we have seen since October 2020, when the surge
in valuations of Israeli tech firms started, will lead to a seismic change of
Israel’s economy in the coming 10 to 20 years,” Sagi Dagan, VP and head of the
Growth, Finance and Strategy Division at the Israel Innovation Authority, said
in an interview. The Israel Innovation Authority is in charge of fostering the
nation’s tech ecosystem and setting out government policies.
The onset of the COVID-19 pandemic, which has underlined the importance of technology and innovation for the survival of businesses, coupled with record-low interest rates and governments propping up their economies with cash injections, has triggered record investments in tech firms globally and has prompted a surge in the global creation of tech unicorns, privately held companies worth at least $1 billion.
Israeli-founded tech unicorns
account for some 8% of this global phenomenon, as its entrepreneurs, once known
for creating technologies and selling them off quickly to the highest bidder,
are now holding on to their fledgling firms in a push to create large and
hopefully profitable businesses.
“Israel accounts for some 8% of global unicorns, but
for just 0.1% of the global population. So, we are punching some 100 times our
weight in the world,” said Aharon Aharon, a former CEO of the Israel Innovation
Authority, in a phone interview.
Many of these Israeli founded unicorns are being set up in Israel and managed from Israel. “Twenty years ago, when Israeli startups got big investments from foreign investors, they would get a US manager and they would move their headquarters to the US to be close to their market and their investors,” said Dagan. “Today, this is not the case.”
The pandemic has shown that the closing of business
deals and funding can be done completely remotely, and so founders are staying
in Israel and growing their companies from here, employing not only core
research and development teams of engineers and programmers but also sales and
marketing staff, accountants and lawyers.
“This is very different from what was before, and
very positive,” Dagan said. There is now a “critical mass” of giant tech firms
in Israel, he said, the likes of which not many countries have. “You have the
US, China, Israel, the UK, Singapore, and Tokyo. This concentration of firms in
Israel will help draw even more unicorns, who will choose to set up their HQ
locally. This is leading to the development of a whole new ecosystem, which
specializes in providing services to these large tech firms – from managers to
lawyers to consultants and banks.”
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