Despite the war, Israel holds third place in global tech investments, but growth slows
Despite the war, Israel holds third place in global tech investments, but growth slows
Cyber leads the charge, but stagnating employment and reliance on mature companies raise long-term concerns.
Israel has maintained its position as the third-largest global tech investment hub, raising nearly $9 billion between October 2023 and August 2024, despite the ongoing war. According to a report published by the Israel Innovation Authority, cybersecurity dominated these investments, with 60% directed towards large, established companies. However, the sector’s growth is showing signs of strain, with employment stagnating and job creation in product and business roles declining.
The report highlights a significant slowdown in the growth of employment within the industry, which was the engine of economic growth over the last decade. Since 2022, the growth in the number of employees has nearly stopped, remaining steady at around 400,000 workers, or about 11% of the Israeli workforce. In terms of employment, Israeli high-tech has maintained stability in capital raising, with nearly $9 billion raised by Israeli tech companies between October 2023 and August 2024. This figure places Israel third in the world for capital raising, behind Silicon Valley and New York, but ahead of other tech hubs such as London and Paris.
In a conversation with Calcalist, Dror Bin, CEO of the Innovation Authority, stated: "We must rely on data, even if it reflects negative trends, and this has been the case since the political crisis began, through to all the events, including the war. The global high-tech industry is in crisis, and we are also dealing with an intense political crisis. We expected the numbers to drop. The fact that, so far, we haven't seen a significant decline doesn't mean much—the war isn’t over yet. While we see recovery worldwide, it is happening at a much slower pace in Israel. If the government wants to prevent further deterioration, it must sustain high investment levels in Israeli high-tech. We cannot allow the growth engine of high-tech to weaken, and continuous investment is crucial. The state must step in during tough times."
The report also points to a shift in the employment mix within high-tech: while R&D positions have continued to grow, employment in product and business roles has weakened. This has resulted in an industry increasingly focused on research and development, with fewer opportunities in roles supporting product development and business operations. This trend limits high-tech’s ability to expand as an employing sector in Israel, particularly for non-technological positions. The decrease in such roles is likely due to the waves of layoffs in the industry, which have disproportionately affected teams in marketing, human resources, and other support functions.
The report reveals that while total investment in high-tech companies has remained stable, there is a trend toward the concentration of investments in more mature companies, particularly in the cyber sector. Nearly 60% of the investments made during the war were directed toward large fundraising rounds (over $50 million), primarily in established companies. Cybersecurity has become especially dominant, accounting for about 35% of total investments during this period—double the figure from previous years.
While employment in high-tech has stagnated, wages in the sector have continued to rise, further widening the gap between high-tech salaries and the rest of the economy. The average high-tech salary in the second quarter of 2024 was approximately NIS 31,500, 2.8 times the national average. The ongoing rise in wages suggests that the demand for technological talent will only continue to grow in the future.
