Israel has emerged as a global leader in the tech industry, earning the title of Startup Nation. In 2021, Israel received twenty-eight times more capital per capita than the U.S., reflecting the country’s reputation as a tech superpower. In 2022, Israel’s high-tech companies raised $14.95 billion in funding through 663 deals. The country invests 4.1% of its gross domestic product into research and development, twice the OECD average, and is ranked second in the world for research and development expenditure per capita. Israeli cybersecurity startups raised $8.8 billion in 2021, more than three times the amount raised in 2020.
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Israel is home to many research and development centers, including those of large companies like Amazon, Apple, Cisco Systems, Facebook, Hewlett-Packard, Intel, IBM, Google, Microsoft, Motorola, SAP, and Samsung. Tel Aviv, Israel’s largest startup ecosystem, has a $120 billion startup value and gained thirty new unicorns in 2021, bringing the total to ninety-two unicorns in 2022.
The Israeli government has created programs and tax incentives to promote entrepreneurship and innovation. For example, the Yozma government program launched in 1983 matched outside venture capitalist investment in Israeli startups and asked the venture capitalist firm to return its investment if the company had a successful exit. Additionally, there are over thirty grants and tax incentive programs for research and development, including conditional grants, reduced tax rates, tax exemptions, and employment aid programs.
Israel’s business success is driven by factors such as U.S. venture capitalist firms opening offices in Israel, Israeli startup founders moving their headquarters to the U.S., small local markets and security threats forcing Israeli entrepreneurs to operate globally, and the elite cybersecurity intelligence unit, Unit 8200, producing world-class cybersecurity experts with the talent to start companies.
In September 2020, the Abraham Accords normalized relations with the United Arab Emirates and the Kingdom of Bahrain, extending Israel’s economic relationships in the Middle East. If the accords grow to include eleven nations, it could create more than four million jobs and over $1 trillion in new economic growth.
Israel has undoubtedly become a technology powerhouse due to its commitment to innovation, government programs, and tax incentives. The country’s resilience and creativity in the face of adversity have driven its remarkable success, earning it a spot on the world stage as a leading player in the tech industry.
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