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Five Reasons Israel is the World’s Hottest Tech Hub

March 6, 2020
By Glenn Solomon

GGV Capital is committed to funding exceptional Israeli entrepreneurs and, after spending a week in Israel last month meeting with dozens of startups and VCs, we’ve confirmed there’s no shortage of Israeli founders building the next billion-dollar enterprise software companies. Here are five takeaways from an illuminating week in Israel. 

Israel is creating global unicorns. Long known as a center of technology innovation, especially for enterprise, security, and AI software, Israel has launched hundreds of great companies in the last two decades, but few were unicorns. Most reached success in the US and ended up being sold for $150-300M in M&A transactions. Now, Israel is batting in the big league. There are already 36 unicorn companies valued at $1 billion or more operating in Israel, 13 of which earned that status in the last year. Some of the most promising Israeli unicorns to date.

Include Monday.comJFrogAppsFlyerHippo, and Houzz. The success of these companies and dozens of others has excited a lot of would-be entrepreneurs and spurred an upswell in venture capital investment, creating a flurry of startup creation. 

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Israeli VC investment 2009-2019; Source: Pitchbook 

Israel is riding the world-is-flat wave happening in tech hubs worldwide. Israel has created a lot of world-class enterprise software companies, but until now, it has been difficult for Israeli companies to gain rapid uptake of their products worldwide. Mostly, Israeli entrepreneurs developed technology in Israel, but opened US offices early on to market their software to US companies. Now, with the ubiquity of cloud infrastructure and SaaS business models, companies can get their products into the hands of developers and end-users all over the world from day one. Engineers today are accustomed to finding the best tools online via GitHub and other global platforms; they don’t care where a software company is based, just how good its technology is. The flattening of the global enterprise software market benefits Israel immensely because the devops software being built there is some of the most sophisticated in the world.

Israel is building the world’s most technically-advanced software companies. A young country built by immigrants, Israel has been a center of technology innovation since its very beginning. Every Israeli spends a mandatory two or three years in the military. Many recruits learn technical skills in engineering and computer science, but even more importantly, everyone learns operational and leadership tactics. Young people leave the military not just with technical know-how, but also the self-confidence to tackle tough situations, try new things, and lead teams. Then, many young Israelis pursue computer science and engineering degrees at one of the country’s tech-focused universities, such as Technion and Tel Aviv University. Israeli engineers have solved some of the most complicated challenges in computer science engineering, creating sophisticated IT infrastructure, cybersecurity, AI, fintech, and software development tools. But Israelis aren’t just crack software coders, they’re entrepreneurs.

Israel now has serial entrepreneurs driving the next wave of startups. Israel has always been a center of technology creation. But in the last few years, a new generation of serial entrepreneurs has emerged who are starting their second or third companies. For example, Nati Davidi and Uri Alter, who co-founded Cyvera and then sold it to Palo Alto Networks, are now collaborating again on VDOO. Guy Podjarny, founder of Blaze.io, is now leading Snyk. And Shlomi Ben Haim, founder of AlphaCSP, went on to start JFrog. There is also a growing talent pool in Israel of engineers, product developers, and marketing professionals who have worked at tech companies from seed to IPO, accumulating deep expertise in building fast-moving companies. That means new Israeli founders have seen exponential growth and have the skills required to do it themselves. 

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Israeli venture-backed deal size 2009-2019; Source: PitchBook

Israel is benefitting from a new awareness that tech talent is everywhere. It’s not just Israeli entrepreneurs who recognize that Israel is a hot bed of tech talent. Companies like Google, Microsoft, and Amazon have set up Israel R&D centers to get access to Israel’s tech-savvy engineers. Other big tech companies, such as Salesforce, Facebook, and Apple, have acquired Israeli startups to scoop up top talent. This awareness by tech’s biggest players that Israel is a world-class tech center makes it easier for Israeli startups to attract investment and customers from around the world. European, Asian, and US companies feel confident purchasing software from Israeli companies, and thus global investors are eager to fund Israel’s next global tech companies. Plus, young people in Israel are globally connected and think with a borderless mindset, developing products for developers and customers anywhere.

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Israeli vs. US venture-backed deal size 2009-2019; source: PitchBook

Of course, GGV Capital is not alone in recognizing the promise of Israeli entrepreneurs. Several Silicon Valley venture firms and many more local ones are investing in Israeli entrepreneurs at top valuations today. There is no ‘discount’ in Israel and there should not be; world-class software companies command world-class valuations. In 2009, 107 Israeli startups raised $484 million in venture financing, according to PitchBook. Just ten years later, in 2019, 338 Israeli startups raised $3.9 billion. While it’s clear that many VCs are investing heavily in Israel, GGV goes a step further with a hands-on, highly tactical approach. We’re a global firm and have been for 20 years. We offer Israeli entrepreneurs direct access to a huge network of potential partners and customers in the US, China, Southeast Asia, India, and Latin America. We help Israeli companies with their natural expansion into the US and other markets. We assist with customer intros, hiring, market positioning, and partnerships development. By working closely with Israeli venture capital firms, we help Israeli founders from both sides—locally and globally. 

Israel is on a tear when it comes to creating the world’s most advanced tech companies, solving problems that impact us all such as cybersecurity, cloud computing, and artificial intelligence. GGV is excited to partner with Israel’s next generation of entrepreneurs to solve some of the world’s most pressing challenges.