Israel’s Startup Success:  How Government Programs and Tax Incentives Are Fueling Innovation

Israel has emerged as a major player in the tech startup scene, thanks to the country’s various government programs and tax incentives that create a haven for entrepreneurs and innovators.  In 2021, Israel received twenty-eight times more capital flow than the U.S. on a per capita basis, solidifying its reputation as the Startup Nation. Israeli high-tech companies raised $14.95 billion in 2022 through 663 deals, while fifty-seven Israeli companies went public and raised $4 billion.  Israeli cybersecurity startups raised $8.8 billion in 2021.  The country invests 4.1% of gross domestic product into research and development, which is two times the OECD average, and is ranked second in the world for research and development expenditure per capita.

Tel Aviv, which is the seventh largest startup ecosystem in the world, has a $120 billion startup value in 2022, while its patent count increased by 169% since 2021. Israel has hosted research and development centers for large companies like Amazon, Apple, Cisco Systems, Facebook, Hewlett-Packard, Intel, IBM, Google, Microsoft, Motorola, SAP, and Samsung.  Israel has created more than thirty grants and tax incentive programs for research and development, including conditional grants, reduced tax rates, tax exemptions, and employment aid programs.

The Abraham Accords have extended Israel’s economic relationships in the Middle East, with 150,000 new jobs potentially created for the four signatories.  If the accords grow to include eleven nations, the impact could be more than four million jobs and over twenty-seven billion dollars in annual exports by 2030.  Israeli success can be attributed to many factors, including U.S. venture capitalist firms with offices in Israel, Israeli startup founders moving headquarters to thrive in U.S. cities to tap into a local investment, and Israeli entrepreneurs being forced to operate globally due to small local markets and security threats.