The AI Tech Field in Israel: Shining a Flashlight on the Future

The Fourth Industrial Revolution is in full force across Israel, and as more and more artificial intelligence technologies are developed to be integrated across numerous sectors. As an investor into Israeli tech it’s been fascinating to both watch and participate in the evolution of the High Tech ecosystem – and I’m equally fascinated to bear witness to the next potential giant leap forward in the development of the industry: that being, artificial intelligence.

Computer systems’ capacity to employ statistical algorithms for emulating human cognitive functions, including learning and self-correction, has advanced significantly in recent years, enabling them to leverage vast amounts of data from global databases for valuable insights. As new tech emerges, the Startup Nation finds itself in a unique position to lead the charge in creating protocols for how we enhance human capital to meet AI needs.

Despite being a small country with limited resources, compared to larger economies such as China or major global tech firms like Amazon or Google, Israel’s innovation ecosystem boasts several inherent advantages – from its entrepreneurial spirit and flexibility to its abundant reserves of raw digital data stored within national databases. All factors which keep external eyes firmly fixed on Israeli innovation to see where potential opportunity could lie to diversify their portfolios.

In recent years, Israel has emerged as a powerhouse in Artificial Intelligence. Between 2011 and 2019, investments in Israeli high-tech AI projects surged exponentially, skyrocketing from $305 million to an impressive $4 billion, marking a staggering 12.5-fold increase over the span of eight years. This significant growth underscores the escalating interest and confidence in Israel’s AI sector, reflecting a profound shift in the landscape of technological investment.

Therefore, suffice it to say that Israel’s AI tech landscape is flourishing.  This growth is not only quantitative but also qualitative, with a wide range of innovative applications being explored, from Natural Language Processing (NLP) to the integration of AI in video games.

While I have observed – and am currently observing – the fantastic investment opportunities arising from the industry as technologies continue to develop, I cannot ignore the number of challenges that Israel must overcome and manage to truly play a leading role in the AI Race.

Considering Regulation Change

The ascent of AI technology brings a host of ethical and moral challenges. This month the European Union is set put in place regulations for artificial intelligence in the EU AI Act – and it can be expected that other regions are likely to follow suit Israel established TELEM, the National Governmental Forum for R&D Infrastructure, a cross-governmental team set up to craft the National AI Program, focusing on ethical AI use, and innovation without democratic hindrances. The program’s dual objectives—to foster a culture of innovation and to develop policies regarding ethical AI use—highlight the nation’s commitment to balancing technological advancement with ethical considerations.

Current regulations in Israel itself are potentially inadequate for keeping pace with technological advancements, often impeding start-ups’ access to databases and hindering product development. The Israel Innovation Authority, in partnership with government bodies such as Digital Israel and the Ministry of Justice, is actively striving to enhance data regulation standards. Meanwhile, efforts are underway to streamline data unification processes and standardize national databases to maximize their practical utility.

Balancing Human Capital Interfacing

Job Displacement is a major concern. Discussions around automation replacing people in certain positions are taking place in many tech ecosystems. It should, however, be argued that technological advancement has always caused a similar shift – and although certain jobs may become obsolete, new ones are created.

Companies need to take into consideration how they can manage digitization and integration with AI technologies, by retraining current team members while onboarding new talent. Being at the precipice of these new developments and with a high level of university graduates in tech-focused disciplines, Israeli businesses and learning institutions are in the perfect situation to forge these standards.

This evolution has already started to take shape. The 2019 High-Tech Human Capital Report by the SNC and the Israel Innovation Authority revealed that AI or data sciences professionals are in high demand. This constitutes 7% of available tech positions within the industry, equating to approximately 1,300 positions.

Cybersecurity Credentials to Lead the Way

Cybersecurity is also a concern when automation becomes more prevalent in technological processes. We have seen over the past few decades the rise in cyber-attacks globally, and arguably the more digitized the world becomes, the more risk of incident.

AI leaves open the potential to create complicated automated, ML-based algorithms, which can make tracing the initial location of hackers. Again, however, Israel’s credentials in cybersecurity are well known throughout the industry, with many of top experts based in the region, thus creating opportunities to lead the way.

Israel’s 4IR Contribution and AI Innovation

Artificial Intelligence in Israel is not just about standalone technologies but is integral to the nation’s contribution to the Fourth Industrial Revolution (4IR). Israel has seen its 4IR-related startups grow by almost 70% since 2014, and the number of investors investing in AI startups has more than doubled.

Eleven Israeli-founded companies and startups were featured in the Fifth Annual AI 100 Finalists Report, recognizing promising global private AI companies innovating across diverse industries and developing a wide range of cross-industry applications.

Spotlight on Israeli AI Technologies and Applications

Israeli startups and organizations are at the forefront of developing groundbreaking AI technologies and applications with global impacts. From healthcare to cybersecurity, Israeli innovators are pushing the boundaries of what AI can achieve. These efforts are transforming industries and setting new standards for how AI technologies can be leveraged to address complex challenges and create new opportunities.

In the cutting-edge field of GenAI, Israeli companies are making strides with technologies that reshape digital content interaction. Israeli Innovators are developing sophisticated LLMs—large Language Models—and NLP—Natural Language Processing—technologies.

These advancements are not only competing with globally recognized models but also serving as the foundation for platforms that improve and generate human-like text, facilitating more seamless interactions between humans and digital systems.

The development of text-to-image generation technologies by Israeli firms marks a significant leap forward. These tools enable the conversion of textual inputs into detailed visual outputs, leveraging GenAI to bridge the gap between descriptive language and visual artistry.

Israeli advancements in animating still photographs to create dynamic video content underscore the innovative application of AI in enriching digital media engagement. This technology exemplifies the practical application of AI in transforming static images into lifelike animations, enhancing user experience, and expanding the creative possibilities of digital content.

Integration of AI for Numerous Sectors

The integration of AI in healthcare and MedTech by Israeli companies has led to significant innovations, including improvements in medical imaging tools, diagnostic applications, and drug development processes.

Utilizing machine and deep learning algorithms, these technologies enhance accuracy, efficiency, and personalized care, contributing to the global effort to advance healthcare through technical innovation. Israeli is a leader in medical technology, a sector which accounts for 34% of tech investments into the country.

AI-driven robotics and cybersecurity solutions developed in Israel represent key advancements in industrial automation, threat detection, and data protection. The application of AI in these domains demonstrates the potential for technology to improve operational efficiencies, enhance security protocols, and safeguard critical information against evolving threats.

The role of AI and machine learning in processing and analyzing data from IoT sensors across various applications is critical for real-time decision-making and operational safety. Israeli innovations in this area exemplify the integration of AI in managing complex systems and environments, from agricultural monitoring to industrial safety measures.

Israel’s Rise in the Global GenAI Scene

According to September 2023 statistics the number of Israeli GenAI startups more than doubled in six months. With an impressive surge in the number of GenAI startups and a substantial influx of investments, the total monies raised by GenAI startups between January and September 2023 alone was $16 billion.

Rapid expansion has positioned Israel as the second top country globally for GenAI funding, trailing only behind the United States and ahead of other tech-forward nations like France and Canada.

The diversity of GenAI startups funded in Israel is particularly noteworthy, spanning various applications that promise to revolutionize industries and everyday life. This growth underscores Israel’s increasingly prominent role in the global tech industry, specifically in the sphere of GenAI, aligning with international trends that see GenAI technologies receiving sustained and significant investment and attention.

A Rich and Varied Landscape

The Israeli AI tech landscape is rich and varied. It is also a pivotal contributor to the global landscape of AI innovation, demonstrating significant advancements in GenAI, healthcare, cybersecurity, robotics, and IoT applications.

The Israeli AI tech ecosystem is underpinned by a vibrant startup culture, which, in turn, is supported by the academic institutions and government initiatives. Moreover, the Israeli AI tech landscape is characterized by a strong emphasis on R&D, advancing 4IR technologies such as machine and deep learning, computer vision, NLP, and robotics.

As a result, AI acts as the central component in the Fourth Industrial Revolution ecosystem, integrating and enhancing the capabilities of the individual technologies described above. AI’s ability to analyze and process massive volumes of data, learn from patterns, and make decisions autonomously allows it to connect these technological domains, resulting in more efficient, intelligent, and interconnected systems across industries. All of these factors merge together to form a very exciting landscape and global investors are certainly paying attention.

Yes, there are certainly challenges ahead to create the right regulatory infrastructure and instil into startup founders with the appropriate attitude to human capital. As an investor, I appreciate founders who possess the ability to look beyond product and understand a brand from a more holistic point of view is – a vital factor for success when it comes to startups, in my opinion.

However, these are without a doubt, exciting times and it would be without surprise to see Israel spearhead future activities which could pave the way for the future of the industry.