State of the High-Tech Industry in Israel 2023 is Strong

The Israel Innovation Authority released its “State of the High-Tech Industry in Israel 2023” report which was presented to Israel’s Minister of Innovation, Science, and Technology Ofir Akunis. While the report had some disconcerting news about what happened in Israel’s high-tech sector in 2022, it provided a bright picture for the near future. In this way, the report echoed similar sentiments made by rating agencies such as Standard and Poor’s and Moody’s.

“High-tech has become critical for the growth and prosperity of the Israeli economy, and the State of Israel needs, especially during times of economic slowdown, to preserve and nurture this national resource in the face of increasing international competition,” declared the Innovation Authority’s report.

The high-tech industry is the fastest-growing sector in the economy, with the highest productivity and the most significant contribution to the economy, said the report. Currently, about 14% of Israeli citizens work in technological and non-technological high-tech professions. The salaries in the tech sector are nearly three times higher than the rest of the economy, and the job satisfaction in high-tech is twice that of other professions in the Israeli economy.

But the Israeli high-tech sector experienced a slowdown in 2022, with investment levels dropping by almost 50% compared to the previous year. This is in line with the global trend, as funding for startups declined in innovation hubs around the world.

The slowdown was attributed to a number of factors, including, the rising cost of living and labor in Israel, which made it more expensive for startups to operate, the global economic slowdown, which led to investors becoming more cautious about investing in risky ventures and the increasing competition from other tech hubs around the world, such as Singapore and China.

Despite the slowdown, the Israeli high-tech sector remains strong. In 2022, Israeli startups raised a total of $16 billion, which is still more than 30% higher than startups’ fundraising in 2020. This suggests that the sector is still attractive to investors, and that it has the potential to rebound in the coming years.

Here are some additional details from the State of the High-Tech Industry in Israel 2023 report:

The record quarter for Israeli high-tech fundraising was the fourth quarter of 2021 when local technology companies – primarily the growth companies – raised more than 9 billion dollars.

The positive trend continued into 2022, and the level of investments during the first two quarters of that year were similar to the corresponding quarters of 2021.

This trend changed during the second half of 2022 however, and total quarterly investments were cut by more than half.

Overall, the Israeli high-tech sector is still a strong performer, but it is facing some challenges. The slowdown in investment is a cause for concern, but it is too early to say whether this is a temporary setback or a sign of a more serious problem. Only time will tell how the sector will fare in the coming years.

Minister Akunis commented, “The Government will continue to care for and support the Israeli high-tech sector. There has been a noticeable slowdown in international markets, including the high-tech sector. Our role as a government is to ensure that Israel’s main growth engine of the past two decades continues to move forward, strengthen, and to lead and inspire on the global stage. As we speak, in Finance Committee of the Knesset, we are nearing the end of the process to pass legislation to encourage capital investments. In the coming weeks, we will announce further decisions that will support Israeli innovation. I call on investors from around the world to continue investing in Israeli high-tech, science, and technology.”