As we head into 2022, forecasts for Israel’s bubbling tech sector are big, optimistic, and showing no signs of slowing down. Industry experts and tech investors are looking ahead with eyes wide open and faith in the country’s entrepreneurs that the year to come will be strong with stable growth.

“We continue to be really excited about Israel as a focus area,” Nicole Priel, partner at Ibex Investors, tells NoCamels. “We’ve been really active in Israel and we don’t see that slowing down…We see so much promise in this ecosystem across enterprise software and other sectors.”

The outgoing year has been one of record-breaking funding, turning crises into opportunity, globally recognized groundbreaking inventions, a surge in valuations of Israeli tech firmsbig acquisitions, and maturation into a scale-up nation.

“We really are transitioning from startup nation to scale-up nation and this is just attracting so much capital,” says Jonathan Medved, founder, and CEO of OurCrowd.

Israeli innovation is everywhere, touching numerous tech sectors simultaneously. In 2021, local tech companies continued to take the lead in cybersecurity, agriculture technologies, financial technologies, mobility, data, and digital privacy, among other fields.

The big question: Where will Israel make its mark in 2022?

With so many booming sectors within the high-tech arena, it’s a tough call to make. So, NoCamels asked the experts to share their predictions for the next 12 months.

If the pundits are right, these are the 7 tech trends where Israel will make an impact in 2022:

E-commerce

E-commerce has exploded throughout 2021, in large part due to the COVID-19 pandemic.

According to market reports,  66 percent of customers choose what to buy based on convenience. So, it is no surprise that e-commerce is a booming industry.

“There’s a couple of spaces that we think Israel is really going to excel in, and…a couple of them are around e-commerce. We are thinking a lot about how companies are going to chip away at Amazon’s monopoly, including around logistics and warehousing” Priel told NoCamels.

Israeli companies are looking for solutions to rapid shipping and the online returns space, among other areas. Priel says Ibex Investors are “taking a look at the online returns space and thinking about how startups can help mitigate online returns” to create a stronger online shopping experience overall.

In addition to changing the way users shop, sellers need strong e-commerce tools for their online stores.

“More focus and emphasis is going to be placed on customer success as a driver within SaaS organizations, so we are excited to see what technologies will pop up to support CS organizations and help drive revenue,” says Priel.

It is more expensive to acquire a new customer than it is to retain a previous customer, Priel explains. It is because of this principle of marketing that customer satisfaction will become a more dominant indicator and marketing metric for SaaS-based companies which could allow sales teams to more accurately serve their clientele.

And, it’s not just in the traditional e-commerce space that we’ll see new solutions.

Medved believes the next 10 years will see huge growth in immersive e-commerce.

“We are looking at all kinds of AR, VR, more immersive interactions [in general] will become more normal over the coming years,” he says, noting investments in ByondXR, an Israeli software company that creates immersive virtual stores where people can pick out goods, and ZipIt, which can turn any store into a touchless, personless Amazon-like store.

Supply Chain Logistics and Delivery Innovations

More advanced logistics, last-mile delivery, and shipment innovations are going to be a popular trend in tech in 2022, says Priel, citing dark kitchens – food producers with no physical location – and dark warehouses – spaces used to deliver orders to shorten the distance to the consumer – as examples.

“We are also very excited about the idea of dark kitchens and dark warehouses for delivering items to consumers, whether it’s merchandise or food,” says Priel.

While these unique distribution methods are important for last-mile delivery, the COVID-19 pandemic put the spotlight on supply chain logistics in general.

“Supply chain is critical … [and] Israel is very strong in terms of optimization and planning. There are a lot of unmet needs that we are busy working on,” says Medved.

Blue-and-white solutions include Freightos, which streamlines the shipping industry through an international freight marketplace; BionicHive, which deploys easily portable and autonomously machines around warehouses; and Trellis which predicts the yield, cost, and quality of produce while using AI to accurately move goods.

Semiconductors and Computer Chips

Semiconductors are found in every piece of hardware we use from personal computers, cars, databases, toasters to rocket ships, and more.

Israel has a global name for its hardware innovation. With an ever-increasing need for processing power –thanks to big data and AI – it’s no surprise that in 2021, this country continued its rule as a global powerhouse in semiconductor and computer chip R&D.

Intel announced in May that it will be investing $10 billion in a new processing center in Kiryat Gat in addition to investing $600 million in its centers in Haifa and Jerusalem.

In March, Google announced that it will be doubling down on Israeli computer chip design and production. They hired former senior Intel executive, Uri Frank as VP of Engineering of Server Chip Design to “build a world-class team in Israel.

Market reports show 2022 demand for computer chips is meant to rise. And this will only benefit Israel.

“The increasing importance of semiconductors will only be good for Israel. We have situations like Facebook, Microsoft, and Amazon all talking about setting up semiconductor activities here,” says Medved.

Quantum Computing

Technology can only move as fast as the computer chips it’s built on. So how is Israel making them faster?

The answer is quantum computing.

Quantum Computing is a type of computing that harnesses the properties of quantum states to create calculations. Naturally, computers can only compute information as fast as physics will allow the particles to move. But, utilizing quantum properties, information can move much, much faster than currently possible.

The Israeli government is making a strong effort to push Israel forward in the field.

In 2019, the Knesset committed roughly $400 million to a five-year National Quantum Initiative which included $60 million towards the effort of producing a quantum computer. Physics Today reported in October that over the last two years, there has been a leap from five to 30 quantum-based companies in Israel.

Earlier this month, Hebrew University Physicist, Dr. Shlomi Kotler, won Physics World’s 2021 Breakthrough of the Year award, presented by the UK-based Institute of Physics to two research teams who advanced the understanding of quantum systems.

His team successfully quantum-mechanically entangles two drumheads that can be used as quantum sensors or nodes in a quantum network.

Physics World editors chose this year’s winners from nearly 600 published research articles and wrote the winners demonstrated “important work for scientific progress and/or the development of real-world applications.”

CEO and co-founder of Israeli-based, Quantum Machines, Itamar Sivan told Physics Today that he has no doubt that quantum computing will become influential and it’s ultimately a question of “When?”. He credits his company’s success to the easy accessibility to funding for quantum based-firms. He said, “There are great engineers and amazing talent in Israel. We can find people here who are both experts in quantum but also have some engineering background.”

Talking about the upcoming year, Medved says, “2022 will see Quantum Computing attract continued strong interest from investors. I expect that global Quantum VC investment will more than double from 2021’s $1 billion and that revenues of Quantum companies will near $500 million in 2022. While this is impressive growth, we haven’t seen anything yet. In a decade from now, Quantum will be ubiquitous, and will be an order of magnitude larger in investment and revenues.“ While the mainstream adoption of quantum computing is still a decade away, the technological advances that are coming out of Israel will definitely make waves in the coming year and beyond.

Blockchain / Web3

The blockchain industry has come a long way. It started 12 years ago as a payment method and store of value. The technology slowly evolved to be a solution for supply chain management, digital security, voting applications, financial applications, and digital ownership in the form of tokens called NFTs and much more.

In 2021, blockchain technology became much more mainstream not only with the explosion of the NFT ecosystem but it gained adoption or is being explored by companies like Nike, Adidas, Facebook (Meta), PayPal, Visa, Ubisoft, and Shopify.

“I think it’s going to flourish like crazy,” Medved says of blockchain. “We’re starting to make investments in those types of companies. We have not been big players or players at all in ICOs or cryptocurrencies but we believe in DeFi and that there’s going to be a lot of business applications utilizing the blockchain and now is the time.”

The blockchain industry is set to be worth $67.8 billion by 2026, according to market reports.

Blockchain is expected to continue being a strong and emerging sector into 2022, especially in Israel.

In November, American cryptocurrency exchange Coinbase acquired Unbound Security for a believed $150 million, according to a report. “Coinbase not only gains access to some of the world’s most sophisticated cryptographic security experts … but also a presence in Israel … We’ve long recognized Israel as a hotbed of strong technology and cryptography talent,” reads a press release.

According to data compiled by Start-Up Nation Finder, cryptocurrency-tagged companies raised, for the first time ever, over $1 billion in funding for 2021. While a big milestone for the Israeli Web3 ecosystem, the global acceleration of the cryptocurrency markets crossing $2 trillion leaves a lot of room for Israel’s growth within this sector.

Digital Health

The pandemic accelerated the need for digital health solutions such as telemedicine, at-home medical devices, and personalized treatments.

“There’s no slowing [digital health] down because people will get healthier, it will become much more efficient and it will reduce medical costs,” says Medved.

Israel has long been a powerhouse in the health-tech space and COVID-19 has only upped its innovation. Israel has over 1,400 digital health startups, according to Start-Up Nation Finder.

On a global level, telehealth has increased 38 times from pre-COVID-19 levels, according to market reports. Global healthcare spending is set to hit over $10 trillion in 2022, and Fortune Business Insight predicts telehealth to be a $397 billion industry by 2027.

Israeli companies are all over the digital health space, with artificial intelligence for drug discovery, molecular diagnostics for personalized treatments, and VR-based FDA compliant telehealth meetings.

Among the companies to hit the news in 2021, are the likes of air filter companies like Aura Air, which this past week won the approval of the health and education ministries to be installed in 700 Jerusalem classrooms, and Tadiran which says it removes 99.9% of COVID-19 particles from the air. Additionally, SaNOtize, invented a nasal spray to kill the virus with a spritz and MigVax, claims to have an oral effective booster against the virus.

Also earlier this month, eight Israeli startups were named to the prestigious Digital Health 150, an annual global ranking by New York-based research firm CB Insights of the 150 most promising companies using digital technology to transform the healthcare industry.

On health care technology, Medved told NoCamels, “The most important word today in venture capital seems to be velocity. There seems to be a speed at which funding is getting done, companies are growing much faster than before and that’s happening in healthcare too which is one of the slower moving areas because of the need for approval and you even see the FDA, because of the changes made in the pandemic just moving a lot faster.”

Next Generation Food

Food tech conquered the headlines in 2021, with a wide range of jaw-dropping innovations.

And Israel is taking part in this revolution of what we eat, how we eat it, what it’s wrapped in, and how it gets from farm to our plate.

In September, Margalit Startup City Galil – the International Foodtech Center, developed in conjunction with the Jewish National Fund (JNF), opened its doors. The center is dedicated to the application of food science and food technologies.

Lab-grown meat was a buzzword in 2021 and is likely going to continue to demand solutions that tackle the harmful effects of livestock systems and reduce the population’s reliance on livestock in 2022. Earlier this year, NoCamels reported on the Israeli FoodTech incubator The Kitchen Hub and how it’s using its resources to cultivate sustainable innovations in the food industry.

Indeed, the Food and Agriculture Organizations of the UN found that “the livestock sector emerges as one of the top two or three most significant contributors to the most serious environmental problems.”

In November, the world’s first lab-grown meat factory opened in Israel.

Future Meat’s cultured chicken shawarma with extruded soy protein and cultured chicken fat combined with parsley and radish salad in warm pita bread. Photo: Dudi Moskovitz

Future Meat Technologies, a cell-grown meat developer, raised the most in the sector’s history with a Series B investment of $347 million. This investment broke records as the biggest single investment in a cultured meat company to date.

Beyond the lab-grown meat trend, a slew of companies like Imagindairy develop animal-free dairy, Ukko designs proteins that don’t trigger allergic responses, and ZeroEgg produces plant-based eggs that aim to behave and taste like the real thing.

“We’re (globally) investing broadly in food, a ton of money, in next generation milk, eggs, fish, and reduced sugar. We’re investing in agriculture tech in terms of data collection and sensors, but not for one year,” says Medved.