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The annual report of the Innovation Authority: the high-tech industry at a crossroads

The annual report of the Innovation Authority: the high-tech industry at a crossroads despite continued growth in 2023 The companies and investors express concerns about the future

Israeli hi-tech in the shadow of the war. The image was prepared using DALEE and is not used as a scientific image
Israeli hi-tech in the shadow of the war. The image was prepared using DALEE and is not used as a scientific image

The high-tech industry in 2023 presents a complex picture, according to "Situational picture: High-tech in Israel 2024", the annual report of the Innovation Authority published today (4.6, Tuesday). In several indicators, Israeli high-tech continued to grow despite the year's challenges - 396 thousand workers were employed in the high-tech industry in 2023, an increase of 2.6% compared to 2022, when during the year about ten thousand men and women workers joined the industry. The share of high-tech in the Israeli GDP reached the level of almost a fifth of the GDP in 2023 (19.7%) - approximately NIS 340 billion, and the share of high-tech was 53% of exports from Israel last year - 73.5 billion dollars - a consistent rate in recent years.

But while the macroeconomic indicators continued their upward trajectory, there are also downward trends in the indices related to the business activity of the industry. The growth in high-tech employment has moderated significantly and only slightly exceeds the rate of population growth, and various business activity indicators have returned to the levels of 2018 or earlier. For example, the investment in Israeli startups recorded a sharp drop of about 55% in 2023, when advanced rounds suffered the hardest hit.

High-tech situational picture - 2024 surveys/Q1

Surveys conducted as part of the annual report among 500 high-tech companies revealed concerns about the future, a prominent percentage of the startups (about 40%) are in recruitment processes scouting recruitment rounds with a lower value (Down Rounds). The main impact of the 7.10 on high-tech companies is a slowdown in the company's business activity, delays in product development or failure to meet the company's goals. During the months of the war, Israeli startups reported that they had reduced their manpower recruitment plans for the coming year, the main reduction expected in the recruitment of male and female workers in Israel. Only 39% of the startups that raise capital estimate with a high probability that they will be able to raise the amount they need.

In addition, data collected among 30 Israeli venture capital funds and in collaboration with the Israel Association for Advanced Industries (IATI) show that almost 40% of the venture capital funds are evidence of a trend in which at least one of their portfolio companies transferred intellectual property abroad due to the local instability. Almost a quarter of venture capital funds estimate over 30% of companies

Their portfolio has already transferred in the last year or will transfer a significant activity abroad in the coming year not as a result of organic growth.

Regarding investment activity in Israel, venture capital funds estimate that in the coming year, foreign funds will reduce their investments in startups in Israel more than Israeli funds. The funds estimate that the local instability has a negative effect on the way Israeli startups are perceived, and it has already caused activity and intellectual property to be taken out of Israel. According to the funds, these trends may worsen in the coming year.

The challenges and importance of high-tech for the Israeli economy:

According to the report, Israeli high-tech is facing a crossroads after a period of rapid growth since 2018. The question is whether, looking ahead, high-tech will return to a pattern of growth, enter stagnation as in the decade after the explosion of the dot-com bubble in 2001, or God forbid to the path of reduction.

High-tech's role as an "economic shock absorber" was significant for the economy and its contribution to GDP growth stood out especially in crisis years such as the Corona epidemic and geopolitical upheavals in 2023. When looking at the period from 2018 to 2023, high-tech is responsible for over 40% of GDP growth In Israel and the authors of the report emphasize that the industry has consistently pulled economic growth upwards in recent years. The centrality of high-tech in Israel's economy is similar to natural resources in other countries, but unlike countries that rely on natural resources as a major industry, in Israel that relies on high-tech, the number of people employed in the industry directly affects its economic activity and growth.

The continued growth of the industry's employment at a rate that exceeds the natural growth rate of the population (about 2% per year) is critical to the positive impact of high-tech on the economy, including a contribution to GDP, exports and state taxes. Moreover, the multinational connections of the industry (investors in startups, multinational companies that are significant employers and purchasers of startups, customers of the Israeli companies, international academic and industrial research connections) emphasize its sensitivity to the integrity of Israel's international relations.

The importance of high-tech is increasing at a time when the country's defense and civil financing needs are increasing, therefore it is important to maintain the scope of the industry's significant economic activity, which generates a stream of significant tax receipts for the country. The report shows that the average salary in high-tech has increased in the last decade almost four times the average salary increase in the other branches of the economy. Damage to Israel's reputation against the background of the situation, which may manifest itself in a decline in a variety of activity indicators mentioned above, puts the future of Israeli high-tech in the short term and even beyond that at risk. Israel's credit rating has already been lowered

 Expresses concerns of foreign investors regarding the future of the Israeli economy. Meanwhile, despite the centrality of high-tech in the Israeli economy, the government's investment in high-tech in Israel is lower than that of countries ranked above Israel in innovation indices

Like the USA, UK and Korea. The industry may find it difficult to survive periods of crisis because it relies overwhelmingly on foreign investments and without a significant local safety net.

In order to deal with the many challenges, the Innovation Authority recommends in the report to manage market expectations and create certainty, especially in light of the industry's reliance on foreign investments. One possible way to increase admissions is to create a multi-year government investment program in high-tech.

In order to continue long-term growth in high-tech, the Authority further recommends investing in quality education for all population groups all over the country and at various stages along the educational and professional path. Also, in light of the growing competition with other fathers of innovation, it is important to learn from other places that have overtaken Israel in various innovation indicators, such as London, where ecosystems of startups and innovation have developed in recent years.

In order to respond to some of the challenges presented in the report, the Innovation Authority presented several plans for investment in the industry in the past year. The main ones are the fast channel for companies with a short runway, the investment scope of which is over 400 million shekels, the launch of the start-up fund in the amount of about half a billion shekels, and the Initiative 2.0 fund in the amount of about 600 million shekels, which are expected to leverage about 2 billion shekels of Israeli institutional funds , as well as an update to the Venture Creation Incubators program in the amount of approximately NIS 150 million.

More prominent data from the report:

About the industry:

  • 396 thousand workers were employed in the high-tech industry in 2023, an increase of 2.6% compared to 2022. The increase in the number of employees is positive, during the year about ten thousand men and women joined the industry. At the same time, the growth rate in 2023 was significantly lower than the annual growth rate since 2018.
  • There are about 9,200 high-tech companies in Israel, of which: 600 new companies established in 2023.
  • 515 development centers of multinational companies employing close to 90 thousand workers. Over 70% of employees in multinational companies are employed by software or semiconductor companies.
  • 393 public Israeli technology companies that trade according to an aggregate value of 234 billion dollars (as of April 2024) and employ an aggregate of approximately 320 employees worldwide (a significant part of the market value and employees in the public technology companies belong to the enterprise software sector). 
    • 843 venture capital funds are active in Israel, of which 537 are foreign venture capital funds and 306 are Israeli funds.
    • Israeli venture capital funds raised a total of 2023 billion dollars in 1.52.


  • The average monthly salary in high-tech in 2023 was NIS 30,217 - 2.74 times the average in the economy, after it increased by 7% this year. From 2013 to 2023, the average monthly salary in high-tech increased by NIS 10,460 - almost 4 times the average salary increase in the other branches of the economy.
  • Wage disparities within the high-tech industry: In the high-tech service industry (software) the average salary is more than NIS 4,000 higher per month than in the high-tech industry industry.


  • In 2023, 395.7 thousand male and female workers were employed in the high-tech industry - an increase of about ten thousand people compared to 2022. The number of employees in the high-tech industry in 2023 was close to 12% of all employees in Israel.
  • From 2014 to 2023, the number of employees in the industry increased by approximately 150 people, a growth of approximately 60% (which was expressed in an annual increase of a double-digit number of thousands of employees every year from 2018). Most of the growth was in companies in the high-tech services sector (software).
  • The main growth in high-tech employment is in R&D jobs in the industry: their number more than doubled from 94 thousand in 2014 to over 190 thousand in 2023.
  • Most of the growth in the last decade in high-tech employment came from the R&D professions. Workers in R&D jobs were 48% of all high-tech workers in 2023, compared to 38% in 2014.
  • There is no change in terms of demographic diversity in high-tech: 65% of the industry's employees are Jewish men (who are not ultra-Orthodox). Almost one in five Jewish men (non-Orthodox) in the labor market works in high-tech. Among Arab women, one out of every hundred women employed in the labor market works in high-tech.
  • Mobilization of high-tech reserves: In the fourth quarter of 2023, 28 high-tech reservists served in the reserves, 60% of them in R&D positions (more of them from among the employees). In January and February this number was reduced to less than 12 thousand people, about 3% of those employed in high-tech.
  • Following October 7.10, there was a decrease in the number of vacancies in high-tech, mainly in the Tel Aviv and Central districts. In the first quarter of 2024, a recovery began and returned to the pre-war level - which was the lowest since the beginning of 2019.
  • Workers in technological positions outside the high-tech industry: in 2023, 165.8 people were employed in tech jobs outside the high-tech industry (that is, technological assistants in non-high-tech industries). This number increased in a decade by 45 thousand jobs - a significantly slower rate of growth compared to the increase in technological positions in the high-tech industry.

The high-tech product:

  • The share of high-tech in the Israeli GDP reached the level of almost a fifth of the GDP in 2023 (19.7%) - about NIS 340 billion. The share of high-tech in Israel's GDP in 1995 was 6.2% - that is, the relative share of high-tech increased threefold in a period of almost three decades. At the same time, the value of the high-tech product grew more than ninefold in real terms.


  • The share of high-tech stands at 53% of exports from Israel in 2023 - 73.5 billion dollars. This rate has been consistent in recent years - in three of the last 4 years, high-tech exports were over 50% of Israeli exports.
  • The main increase in high-tech exports is due to growth in the exports of companies in the high-tech services industry, which mainly includes software companies. On the other hand, the export of industrial companies, which includes defense, hardware and pharmaceutical companies, has maintained its size in the last decade (about 20 billion dollars per year).


  • Israeli technology companies raised about 8 billion dollars in 512 capital raising rounds in 2023 - a decrease of about 55% compared to the total capital raisings in 2022. The main decrease was in advanced capital raising rounds, of over 50 million dollars, the number of which decreased, but the size of the average round remained similar compared to recent years.
  • 60% of the investments in Israeli startups in 2023 were in three leading areas: cyber, fintech and enterprise software. An increase from a rate of 53% in 2022.
  • Most of the private market investments in the rounds in the early stages, which are up to 10 million dollars, are in the fields of software (over 70%). In contrast, the government's high-tech investments of this size carried out by the Innovation Authority are mainly in the fields of life sciences and climate technology (energy, water, foodtech and agritech).
  • During 2023, it seemed that the downward trend in capital raising for startups that began in the second quarter of 2022 was halted. The total quarterly raising was about 2 billion dollars per year. From the data collected so far, the total quarterly recruitments in the first half of 2024 are expected to exceed this amount.
  • The number of quarterly hiring rounds continued to decline throughout 2023 and into the first quarter of 2024. The number of quarterly rounds in 2023 and early 2024 is the lowest since 2017.
  • Capital raising for venture capital funds in Israel decreased by 2023% in 70 compared to the average raising in 2018-2022. This is compared to a decrease of about 30%-40% in other fathers in the world that were tested.


Gila Gamliel, minister of the HMT: "Innovation is our most important natural resource, and the high-tech industry is the main growth engine of the Israeli economy. We see the high-tech industry continues to develop and lead the world. However, to ensure that Israeli high-tech continues to grow and prosper, we as a government must continue to support companies and develop the necessary infrastructure. We will continue to act with determination and cooperation with all the relevant parties to maintain our position as leaders in technological innovation in the world"

Alon Stopel, Chairman of the Innovation Authority: "Israeli high-tech is the leading industrial sector in Israel. Despite the global and local challenges, its growth continued in 2023 absolutely and relatively so that it constitutes about 50% of exports. This growth further emphasizes Israel's economy as a technology hub. On the other hand, the sequence of challenges and the lack of human capital and geographic diversity, bring us to a sensitive point where significant government involvement is required to preserve the leaders. Unlike the major technological fathers of the world, in Israel the government budget for R&D is relatively low. Most of the investment in high-tech comes from non-governmental sources, and a significant part of the investments come from foreign sources. Therefore, the strength of the high-tech sector must be strengthened through budgetary additions from diverse sources, including governmental ones, to address market failures and reduce the sensitivity of this central growth engine to external capital investments. We must continue to focus efforts and mobilize additional resources, to strengthen the development of companies in late growth stages, R&D challenges in mature companies and the creation of international collaborations also in the fields of tech production. Driving Israel's high-tech industry forward, as a beacon of success, is the key to continuing economic leadership and strengthening Israel's impact in the world."

Dror Bin, CEO of the Innovation Authority: "Despite the many challenges in 2023, Israeli high-tech continued to grow. However, the industry's past success is no guarantee of its future success. The report shows that Israeli high-tech is now at a crossroads: Israel's excellent basic data have not changed, there are world-class entrepreneurs, investors and researchers here. However, the high dependence on foreign investments on the one hand, and the growing competition, backed by huge government investments, from the other "fathers" of innovation in the world, on the other hand, oblige us to rethink the way the Israeli government invests in the industry responsible for about 20% of GDP and half of exports. In 2024, and with a special government budget, we launched a number of strategic moves that included, among others, the fast channel, the start-up fund and the news initiative fund. However, significant additional government investment in the ecosystem is required in the coming years as well in order to ensure the continued growth of the engine of the Israeli economy. This is the time to act because the damage to Israel following the war, which has already been reflected in the lowering of the credit rating, may lead to a decrease in investments and the flow of capital into Israel. In an industry that depends on foreign capital for its continued growth - this is a significant threat and it is our duty to ensure that a scenario of a lack of funding does not materialize."

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