Israel’s high-tech sector thrives amid conflict, urges increased government investment

Despite the ongoing conflict with Hamas in Gaza, Israel’s high-tech sector now contributes 20% to the country’s economic output, according to the Israel Innovation Authority (IIA). In 2023, 600 new startups were launched, and tech firms raised $8 billion, a 55% decrease from 2022. Israel has around 9,200 tech firms employing 400,000 people. It remains the country’s main growth driver, accounting for 53% of total exports.

To continue supporting tech growth, the IAA’s chief executive told Reuters that the government needs to increase investment in the sector, given Israel’s limited natural resources. Innovation, Science and Technology Minister echoed this sentiment and stressed the importance of innovation as Israel’s ‘most important resource’.

Cybersecurity and fintech are the leading sectors for investment, with climate tech also gaining traction. IIA also noted that around 8% of tech workers were called into army reserve duty, and many volunteered. The authority predicts a surge in new startups due to recent connections and insights into civilian and defense needs from the conflict.

Why does it matter?

The IIA’s call is well justified. Despite foreign investors remaining active due to attractive valuations of Israeli companies, the tech sector has not been immune to the Israel-Hamas conflict. A survey by the Israel Advanced Technology Industries revealed that 65% of venture capital funds faced operational challenges due to their Israeli identity, and over 30% of Israeli companies and startups have relocated significant activities abroad.