The big picture
Despite a population of less than 9 million people, Israel at one time had more companies listed on the NASDAQ than any other country, except for the United States and China. But Israel’s power as a tech hub, paradoxically, comes from its small size. Because it lacks a built-in domestic market, it has constantly looked outward for everything from venture funding to customers to sales teams, while maintaining a close-knit community at home.
Many successful Israeli companies have close relationships with Silicon Valley. Management will often spend time living in Silicon Valley to court funding and hire sales teams, even as their main tech team stays back in Tel Aviv. By some estimates, there could be upwards of 100,000 Israelis living in Silicon Valley, many of them working in tech. This population isn’t a diaspora as much as an exchange program. The symbiotic relationship with other tech hubs is what sets Israel apart, allowing it to develop products with built-in expansion plans and global partners.
Big Stat: $21.74 billion
In 2019 alone, Israeli tech companies’ exits — either a merger, acquisition, or public offering — rose to a record $21.74 billion, up 72% from 2018.
View from the ground
Oded Hermoni, an Israeli investor based in Silicon Valley, said that being forced to look outside Tel Aviv because of the limitations of its size is actually an advantage. It gives the ecosystem more agility and adaptability, because of startups’ ability to constantly enter new markets and have flexible organizational structures. “There are a few things that are easier for a small boat to do than a big ship,” Hermoni told Rest of World, specifically citing Israel’s ability to have close business relationships with both China and the United States.
“This model where some of the people go to Silicon Valley has been phenomenally successful for Israeli companies,” said Gigi Levy-Weiss, a 49-year-old partner at a seed fund. While partners of his venture fund are based in the U.S., Levy-Weiss is actually an outlier: he stayed in the country. “I was lucky enough — or unlucky enough — to succeed early on in a way that never forced me to move,” he told Rest of World.
He described two playbooks for Israeli companies — either to keep the headquarters in Israel but hire key teams in the United States, or to move the headquarters to the United States while still keeping the engineering in Israel. One famous example of this cross-border collaboration is Waze, the mobile navigation app. The company formally moved to Palo Alto around late 2010, but the majority of its employees still lived in Israel. In 2013, Google acquired it for more than $1 billion. In a 2014 blog post, then-CEO Noam Bardin said the reasons for the move were clear: The U.S. was the app’s core market, the company needed more media coverage and a bigger network, and the odds of the app being acquired were higher.
Neighborhood spotlight: Azrieli Center
Tel Aviv, a city of roughly 430,000 people, is home to many of the country’s biggest tech companies. Many are concentrated in a three-tower complex called the Azrieli Center — which is often displayed in articles about the country’s tech scene — including the insurance software giant Sapiens and the AI processor company Habana Labs, recently acquired by Intel for $2 billion.
Just down the block, the shimmering Azrieli Sarona Tower became the tallest building in Israel when it opened in 2018. Some of the biggest tech players in the country, including Amazon and Facebook, rented office space there. In 2020, there were reports that Facebook would take over another two floors, as it anticipated workers returning to offices after the pandemic.
The big name: Wix
Web development service Wix is an Israeli success story, going public in the U.S. in 2013 and currently with a market cap of $16 billion. It’s also a uniquely Israeli startup story, in that it’s linked to the country’s mandatory military service. Wix is just one of the many tech companies, like Taboola and Waze, to be founded by alumni of the country’s intelligence services. Even though the reality of Unit 8200 is likely far lower-tech than it advertises, Israel’s cybersecurity sector — in the form of both companies and trained engineers — is booming.