According to the Innovation Report, About 10% of Israeli Employees Work in the High-Tech Sector, and they are Responsible for: 15% of Israel’s Gross Domestic Product (GDP), 25% of the Total Income Tax Paid In Israel, and 43% of Exports. The report also notes that a third of the university students are studying scientific subjects and have the potential to integrate into the high-tech sector, while only about 45% of the employers are willing to recruit junior employees. Therefore, without a change in perception by the sector’s employers – the junior problem will only get worse.

Furthermore, the report notes that the number of startups established in Israel each year is declining, early capital issuance rounds are decreasing and the Innovation Authority’s budget as a percentage out of the state budget is significantly lower compared to other countries that lead in global innovation. Therefore, while the Israeli high-tech sector handled quite nicely the turbulence of the corona crisis and even seemed like it has never seen a better time – the report unveils some worrisome indices that highlight the fact that in order to maintain a sturdy Israeli economy, the State of Israel must continue to work and ensure the prosperity of the sector.

Among the significant highlights of the report:

  • Over the past five years, the number of new start-ups established annually in Israel fell from 1,400 in 2014 to 850 in 2019, and it is estimated that just 520 new start-ups were established in 2020.
  • Where will tens of thousands of graduates holding high-tech professional degrees work? One in every four students in Israel is studying for a bachelor’s degree in technological fields, including engineering or computer science. An influx of new graduates could exacerbate the existing “entry-level” problem. By 2030, more than 20-25 thousand employees with limited or no experience are expected to join the high-tech sector each year, but according to the Israel Innovation Authority and Start-Up Nation Central’s Human Capital Report, only 45% of companies recruit “junior employees.”
  • Are multinational companies no longer interested in coming to Israel? In an interesting change of trend, in 2020, multinational companies only opened four new research and development centers in Israel; they are, for the most part, usually established as part of mergers and acquisitions. This trend demonstrates the sector’s maturity, with an increasing number of start-ups seeking to maintain their independence. Nonetheless, the workforce at these companies has expanded at the same high rate as the rest of this sector, and its share among the total high-tech sector has been maintained.
  • The number of investments exceeding $100 million has increased almost sevenfold in the last five years – from three investments in 2015 to 20 investments in 2020. In the first quarter of 2021 alone, there were 20 investments of over $100 million.

Download IIA’s innovation report 2021 here.