The 6 Key Factors to Israel’s Innovation Success

The 6 Key Factors to Israel’s Innovation Success

Why is Israel doing so well on the innovation and investment front? There are 6 key reasons.

Partner, Head of Markets

KPMG in Israel


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Israel has always had a strong start-up community, but over the past year a lot of international investors have started to take notice of what’s happening here. During the first six months of 2015, there was over $5 billion in acquisitions as established companies, many based in the US, made investments in Israel’s growing tech sector.

Why is Israel doing so well? In speaking to my clients and business partners, I’ve found that there are 6 key reasons for Israel’s performance on the innovation and investment front:

  • Innovation coming out of Israeli Defense Forces: Most Israelis above eighteen years of age – both men and women – serve a term with the Israeli Defence Forces. A number of these individuals serve in technical roles, gaining significant training and experience in IT, cyber-tech, cyber security and other activities that provide a strong base for success once their terms of service are completed. In fact, many cyber-experts have been headhunted out of the IDF by start-ups and other companies, while other experts have started their own businesses using the skills they’ve obtained. This homegrown development of capabilities and expertise gives Israel a population of skilled individuals unlike anywhere else in the world.
  • Strong Spirit of Entrepreneurialism: Between the number of start-ups in Israel, the presence of numerous R&D Centres and Business Accelerators, it’s not surprising that Israel has a strong spirit of entrepreneurialism. Added to this is our large population of millennials entering the workforce – young people who are less interested in traditional businesses and dream of starting their own companies and having big exits. This entrepreneurial spirit is one both companies and the government are buying in to – which is helping to cement a culture of creativity in the country which will support innovation for years to come.
  • Presence of the ‘Big Players’: Google. Intel. Apple. IBM. Cisco. Facebook. Microsoft. Many of the big names in the technology world have already realized how beneficial a presence in Israel can be – as a link to new R&D, talent, and investment opportunities. If other companies aren’t looking yet, they will be soon.
  • Attractive for VC Investors: When it comes to investing in technology, some VC investors see Israel as more attractive than Silicon Valley. Investment costs are lower, and yet there’s a large degree of IP being developed in the country – especially in the fin-tech, cyber-tech, medical devices and IoT fields. The mix of early and mid-stage companies with traditional corporations also provides a strong basis for long-term innovation and investment.
  • Government Incentives: While a number of large corporations are investing in R&D centers in the area, the Israeli government is also willing to provide R&D grants that range from 20% to 50% of the total approved expenditures; with additional grants (up to 10%) for R&D projects conducted in certain development areas. This funding encourages and provides new entrepreneurs with support for their business ventures.
  • Mature Support Structure for Innovation: In tandem with the rise of Israel as a start-up and innovation hub, the country has developed a strong advisory services support ecosystem for early stage companies and businesses operating within Israeli-based accelerator programs. Legal firms, accounting firms, advisory firms, angel investors, incubators, accelerators and corporate venture capital firms have enabled start-ups to invest more in their R&D and innovation while benefiting from knowledgeable advisors.

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About the Author

Jonathan Lavender

Jonathan is currently the Head of Markets at KPMG in Israel. He has over 15 years of experience working with multinational companies, startups, as well as PE & VC Funds operating in several sectors: Financial Services, Technology, Life Sciences and others. He is focused on helping clients with a wide range of issues while delivering cross-functional solutions. Jonathan is also active in the investment space, assisting companies as well as professional investors in Israel and abroad on identifying transactions in a wide range of industries including: Technology, Energy and Real Estate. 

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