Israel facing a decline in number of startups

Simcha Pasko

Digital Journalist

4 min read
A general view of Tel Aviv, Israel.
Yossi Aloni/Flash90A general view of Tel Aviv, Israel.

Only 417 new startups were founded in Israel in 2021, according to the Start-Up Nation Policy Institute

A study published Thursday by Israel's Start-Up Nation Policy Institute found that there has been an average annual decline of 11.3 percent in new startups founded starting in 2017, a problem that "can no longer be disregarded."

According to the SNPI, the government must act to increase entrepreneurial activities, as only 417 new startups were founded in Israel in 2021. 

Several hypotheses were examined to explain the decline. One is that the technological developments of the last few years cause startups that are opening to be already more extensive at the stage of their establishment. 

The report notes that the number of employees at companies established in 2020-2021, one year after the establishment, was roughly 27 percent higher than the figure regarding companies founded in 2014.

Start-Up Nation Policy Institute
Start-Up Nation Policy InstituteThe number of startups opened each year according to Start-Up Nation Finder (Blue), the estimated number of new startups opened in the said year and not yet reported (Orange)

"However," the report continues, "the increase in the total amount of high-tech employees is still lower than the decline in the number of startups."

The SNPI also notes competition for resources versus large companies as a reason for the decline as it raises the cost of entrepreneurship and increases the cost of establishing a startup due to the high salaries given to employees.

Other hypotheses examined that don't explain the declines are improved quality of the startups and a shift in investor preferences. The report notes, however, that "current figures demonstrate that there was no significant or methodical difference in the quality of startups based on their inception year, based on a specific quality measurement method."

The report continues that SNPI believes the government must prepare and promptly implement programs to encourage technological entrepreneurship, including increasing Innovation Authority support budgets for entrepreneurs and startups.

The SNPI also calls for the Innovation Authority to increase the budget ceiling for technological employees in high-tech companies - which is currently at roughly $10,000 monthly - to reflect the increase in startup salary costs.  

“Startups are the core of Israeli high tech," said SNPI CEO Uri Gabai. "The erosion of entrepreneurship in Israel should concern those who treasure high-tech robustness. The new figures demonstrate that, even in 2021, a record-breaking year for investments in Israeli high-tech, the decline has continued and even worsened."

"We at SNPI believe that these figures call for active and smart action by the government to encourage the entrepreneurship that positioned Israel as the Startup Nation.”

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