Israeli companies raised more than $10 billion in 2020, an increase of over 20 percent compared to the previous year, says a report by Start-Up Nation Central (SNC), an independent non-profit organisation that builds bridges into Israel's innovation.
According to that report, the cash raised was the highest in the past six years and provided a stark contrast with companies in the US and Europe that saw only a five percent and a one percent increase, respectively.
Companies that managed to raise the impressive sums mainly deal with enterprise solutions, e-commerce, digital housecare and medical products, but Aviv Alper, senior director of research at SNC, says a big bulk of foreign investment went into Israeli firms dealing with cyber security.
Reasons for Success
The signing of normalisation agreements between Israel, the United Arab Emirates and Bahrain opened new vistas to many Israeli companies and paved the way for impressive cash injections, but that was not the only factor that contributed to that success.
"One of the reasons for this [spike] was the eruption of COVID-19. Many companies were looking for ways to interact with their employees online and do things remotely and that, of course, prompted them to [look] to the help of cyber security companies to protect themselves."
SNC's estimates suggest that Israel's cyber security companies raised nearly $2.5 billion in 2020 that poured into such firms as Toka, which develops cutting-edge intelligence-gathering platforms, and SentinelOne, that enables the detection and prevention of attacks in times of an increase in network traffic and virtual presence.
"Of course, not all companies that raised impressive sums managed to do so because of COVID-19, but the pandemic has definitely presented an opportunity to many Israelis firms," said Alper, adding that they were able to squeeze the most out of the crisis.
The main reason for that success, believes the researcher, is Israel's flexibility and the fact that many Israeli companies managed to adapt to the changing reality, flooding the market with products that were able to offer solutions to the pandemic and the challenges it presented.
Such was the case with Blue and White Robotics, a company that specialised in creating technologies designed to minimise the dependency of companies on a traditional workforce.
With the eruption of the pandemic, they adjusted some of their products, transforming their automated shuttles that were initially used for Haifa port employees into a tool that would carry blood samples from one hospital building to another.
But Israel's adaptability was not the sole reason that contributed to the ability of companies to raise funds. Alper explains that global circumstances have also played a pivotal role in making that success possible.
"The pandemic created a situation where a lot of money has suddenly become available. So investors decided to invest that cash into Israel that has proven to be a hub for innovation and technology."
More Success Yet to Come
Interestingly enough, foreign investors opted to pour in their cash injections into well-established Israeli companies and those that have had a proven track record of achievements.
The small start-ups were mainly overlooked, something that hampered their chances to employ high-profile engineers and other qualified personnel.
Now with 2021 just around the corner, Alper believes that these trends will continue and that Israel will manage to break the record set in 2020.
"First of all, the demand for digital services will not disappear even after the pandemic is over," she said, referring to the mass vaccination that's currently taking place in Israel.
"Secondly, the economy that has been hurt during the pandemic will start recovering in 2021 and that means that companies that have been hurt will begin to get back on track. And lastly, money will still be available globally and foreign investors will still want to put their cash into well-established firms."