Israel’s tech sector is on the wrong track

Israel’s tech sector is on the wrong track

On the surface, it appears as if Israel, with a population roughly 50 times smaller, has nearly as many unicorns as the European Union. It may seem strange to imply that the chasm may widen any farther. Nonetheless, this is the case. The IT ecosystem works in a similar way to a flywheel. Money flows into the ecosystem in three ways when entrepreneurs sell or go public. The first is, of course, the infusion of cash from investors.

The formation of new investors is the second impact. The assumption that newly rich entrepreneurs (and workers) first purchase a house — and then start investing in businesses themselves — has some merit. Third, venture funding flows to individuals who have already demonstrated successful innovation – a halo effect that can see in both Israel and San Francisco. Early workers of businesses like Google, Uber, and Twitter who later became investors or founders had similar events. It also happens in Israel, where employees are frequently convinced that they can exceed the founders who endowed them with fortune.

Becoming employee No. 10 at an Israeli success story like Monday.com or SentinelOne is similar to being employee No. 15 at Uber or Instagram: the firms give a halo, but not by much. These ex-employees-turned-founders have the talents and credentials that investors are looking for. In addition, occasionally Israeli chutzpah can take care of the rest. That is why Israel is promoting the creation of 100 unicorns, or privately owned enterprises worth a billion dollars or more. In comparison, Europe has a far higher population but just 125 unicorns. A huge success calls for an explanation.

For starters, Europe’s corporate culture is significantly more risk adverse than Israel’s, owing to the latter’s previous success. In much of the EU, there are simpler ways to make a livelihood, but in Israel, with its less developed legacy economy, tech entrepreneurship has historically been a more enticing option. That model was ideal for a scrappy society made up primarily of immigrants or their offspring, which has never seen genuine peace. It is a narrative of how a spirit of adventure — and its relatives, creativity and business — came to be. Add in technologies developed by the security sector and the military because of the conflicts, as well as widespread emigration from the post-arms-race Soviet Union, and you have a tale.

Toss in the COVID element for a fresh wrinkle. Due to an early bet on vaccinations and the fact that its outside tech industry (which accounts for about a tenth of the workforce) was ideally adapted for remote work, Israel was able to emerge stronger from the epidemic. Moreover, at this time, Israel received a substantial amount of venture capital funding.

This is occurring at the ideal moment. Israeli firms shown significant potential in sectors such as food tech, agritech, space tech, and, of course, vaccines, where they are already punching above their weight in areas like as cyber, finance, and SaaS. Nevertheless, here is where things start to seem bleak: a big hurdle might prevent Israel from fulfilling its full potential.

On the surface, Israel appears to be well prepared to offer labor to its industries. Indeed, according to this statistics, Israel has 135 scientists and engineers per 10,000 people, which is “greater than any other developed country.” However, it is insufficient to meet the demands of the booming IT sector. According to the Israel Innovation Authority and Start-Up Nation Central’s 2020 High-Tech Human Capital Report, 60 percent of tech enterprises are having difficulty-hiring personnel, and there are now 13,000 unfilled tech job positions in the nation. According to many recent studies, there are persistent shortages of engineers; 14,000 engineer openings recorded in September.

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