The Israeli media Globes quoted a recent report issued by the Association of Advanced Technology Industries in Israel (IATI) in cooperation with the Israeli Research and Policy Institute (RISE), which issued an important warning about the future of the technology industry in Israel, highlighting major challenges and risks that have emerged over the past year.
The report, titled “The State of High-Tech in Israel in a Year of War,” presents a more bleak picture than other assessments, such as the recent report by Israel 21c.
Decline and concentration of investments
According to the report, venture capital investments in Israeli companies declined by 6% between October 2023 and September 2024, along with a sharp 30% decline in the number of foreign and Israeli investments.
These trends are particularly worrisome because they indicate a shrinking pool of investors involved in Israel’s tech sector, according to Globes.
The report highlighted a worrying trend of investments being concentrated in a smaller number of companies. In 2024, the top 10 investments represented about 50% of total investments in the technology sector in Israel.
In addition, 76% of the companies that have succeeded in raising significant funding are based outside Israel, raising concerns about Israel’s ability to maintain its competitiveness and leadership in the high-tech sector, according to the newspaper.
The report by the Israel Advanced Technology Industries Association contrasts with the more optimistic view presented by the Leumi Tech Institute. According to its latest report, investments in Israeli technology increased by 32% in the first nine months of 2024, demonstrating the sector’s resilience.
Concerns about AI leadership
The report by the Israel Advanced Technology Industries Association also highlights Israel’s decline in the global AI rankings compiled by Tortoise Media, where it fell from seventh to ninth place over the past year, after ranking fifth in 2021, according to Globes.
This decline reflects a worrying trend of declining competitiveness in an area of increasing importance in global technological innovation.
The report also noted that about 50% of companies that raised seed funding in 2022 are having difficulty raising subsequent funding rounds, which could threaten the growth and sustainability of startups in the Israeli tech ecosystem.
Uri Gabbay, CEO of the Israel Institute for Research and Policy, called for immediate action to address these challenges, stressing the “perfect storm” threatening the future of high-tech in Israel.
“The war created a perfect storm that threatens the future of high-tech in Israel,” he said. “The report we published shows on the one hand the resilience of the industry, but it also highlights warning signs and very worrying trends that have dramatic consequences for its future.”
Gabbay stressed the need for the Israeli government to adopt a clear vision that inspires investors and entrepreneurs, adopts responsible economic policies, and reduces international isolation, according to what the newspaper reported.
Gabbay warned that failure to take decisive action could expose Israeli high-tech to serious risks, which would affect the national economy more broadly.
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