Could Israel’s thriving startup surge grow to compete with Silicon Valley?

The Covid-19 pandemic has been a troublesome time for global startup ecosystems. The widespread acceleration of digital transformation and switch to work-from-home business models has impacted many growing businesses, but these challenges haven’t stopped Israeli startups posting record-breaking funding figures across 2021. Now, as the Startup Nation’s successes continue to mount, some experts believe that Israel may one day have its sights set on competing with Silicon Valley. 

In the first three quarters of 2021 alone, Israeli tech raised a record-breaking $17.78 billion in 575 deals, according to a report published by the IVC Research Center and law firm Meitar. 

The funding raised represents a 71% increase from the $10.3 billion raised in 2020. The report showed that much of the increase in volume has been down to the presence of 53 deals worth over $100 million each – accounting for $9 billion of the money raised in the first three quarters alone, representing a 51% share. 

In just Q3 of 2021, Israel’s startups welcomed 177 investment deals of a combined total of $5.89 billion – showing that momentum is continuing to grow surrounding the country’s exciting ecosystem for emerging businesses. In Q1, over $5.38 billion in investments were undertaken, while Q2 saw more than $6.5 billion generated across a total of 230 deals. 

Early round investments, comprising of seed and A round deals, saw an increase in the first three quarters of the year also, whilst capital investment volume also grew. Even without the presence of Q4 results, 2021’s totals already surpass that of 2020 for both seed and A round deals – which has raised a total of $2.5 billion so far in comparison to $1.86 billion gathered from 343 deals across 2020. 

As data shows, this increase in VC funding has led to many startups reaching unicorn status at a faster rate. In fact, the average time it’s taken for startups to become a unicorn has fallen to less than three years across 2019 and 2020. This rapid rate of growth promises to put Israel in contention with the world’s leading tech hubs in the future. 

Mounting Competition for Silicon Valley

Israel’s post-pandemic growth is unignorable. Covid-19 has “added even more fuel to the fire,” claims Keren Levy, COO at Payoneer, a startup that reached a valuation of $3.3 billion recently. 

Last year, we saw a decade of digital commerce development happen in three months. We also saw remote work transition from a growing trend to the new normal, and we discovered new gaps and challenges that had to be solved through technological solutions.” Levy added.

Although venture capital isn’t always a flawless avenue for startup growth, its funding can often open the door to rapid scaling among emerging businesses, which has helped to turn Israeli’s startup scene into a conveyor belt of exciting unicorns. 

The performance of domestic startups is turning heads at such a rate that Google has recently selected 10 Israeli businesses to join the company’s Startup Growth Lab, which now runs in 14 different countries.

Startups like Coralogix, Compete, Juno Journey, Circles, LingoPie, Cyrus, Zenner, Rewire, ​​CalmiGo, and Antidote Health have been selected to take part, with 34 startups participating in past cohorts. Esteemed graduates from the program include names like Orcam, Melio, Papaya Global, Elementor, Oribi and Workiz, among many more names.

Collectively, Startup Growth Lab participants have raised $2 billion after their involvement in the scheme and hired over 4,000 employees along the way. Four companies also became unicorns whilst one has since filed for an IPO.

During the program, participants take part in workshops and receive mentoring based on brand communication, product, user experience, measurement and advertising. Additionally, all participants gain expert industry analysis from Google’s team of analysts.

Google’s Startup Growth Lab interest in Israeli startups points to growing international interest in the development of small businesses in the Startup Nation. As the spotlight continues to shift towards Israeli startups, it’s led to business experts like Forbes entrepreneurial contributor, Eyal Bino claiming that “Israel now feels a lot more like Silicon Valley than Silicon Wadi.”

To support further startup acceleration across Israel, we’ve seen US seed accelerator firm Techstars welcome 12 startups onto its 13-week program in October.

Due to the ever-increasing rate of startups emerging across the country, is accelerator program marks the first time that two cohorts have run in the same year.

The companies that have been chosen to take part in this latest cohort span from a range of vertices that offer solutions across various industries. Each firm selected, which were picked from hundreds of applicants, will each receive $120,000 and world-class mentoring for high-quality consultation. Businesses will also gain access to Techstar’s worldwide network of industry professionals and strategic investors.

“It is the first time, internationally, we are opening two programs for the global accelerator in Tel Aviv in the same year,” said Hila Ovil-Brenner, entrepreneur and Techstars Israel managing director. “I see it as an honest vote of confidence in the local program, in the Israeli ecosystem, and in Israeli startups in general. It is a great opportunity for these 12 companies who will receive the incredible and unique opportunity to meet and learn from leading experts.”

Although Silicon Valley will remain the iconic hub of global tech giants for some years to come, US interest in accelerating the growth of Israel’s startups opens the door to a rate of scaling that could see the tech hubs of Tel Aviv one day mount some serious competition for their western counterparts. In Israel’s startup melting pot, anything’s possible in the future.