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2016/17

|

High-Tech & Technology -

DUN’S

100

7

Industry trends

At the end of 2016, there was much discourse

concerning the downward trend in the total

amount of exits in the Israeli High-Tech indus-

try, from $7.2B in 2015 to $3.4B in 2016, and

the meaning of this trend to the industry. The

Israeli High-Tech industry must be evaluated

by other parameters, which are just as impor-

tant (and perhaps more important) in order to

reach conclusions concerning its situation and

the direction in which it is developing. In this

review, we present several additional param-

eters that may provide a better indication on

the current situation of the Israeli High-Tech

industry and its evolutionary path.

According to data from the Central Bureau

of Statistics, the number of tech jobs as of

October 2016 was 292,000, about 8.57%

of the total number of jobs in the Israeli

environment.

Between January 2015 and October 2016,

15,000 jobs were added to the Israeli High-

Tech industry. The average annual growth rate

of tech jobs in the past three years amounted

to approx. 9,000 jobs per year. The growth rate

might have been faster if the human capital

supply were to match the demand.

As of January 2017, approx. 6,650 High-Tech

companies are operating in Israel, of which

about 4,750 (roughly 71.5% of High-Tech

companies) are start-ups in various stages of

the VC cycle. About 3,650 start-ups (roughly

77% of the all start-ups) raised capital at least

once from an external source, such as gov-

ernment funding, angels and VC funds. One

of the strongest indicators for the evolution

of the industry, is the clear upward trend in

the number of mature Israeli tech companies

– 385 companies in the industry are large

companies with more than 100 employees

(approx. 6% of all companies), a 29% increase

over the past six years.

Another indicator for the industry’s maturity

and the increase in hidden value is the in-

crease in the number of start-ups that prolong

their bootstrapping stage. This trend indicates

that more start-ups are being managed with a

lean structure and prefer to receive funding at

High-Tech Industry Snapshot

By Tzah Berki, Senior VP Data & Research and Chief Economist

Profitability

Stage

Idea

Pre-Seed

Seed

Early-Stage

Later-Stage

Positive Ebitda

Funding

Grants & Relatives

or Bootstrapped

Grants & Angels

Angles /

Early Stage VC's

VC's

PE's / Banks /

IPO / M&A

No. of Israeli

companies

A lot(!)

1,900

1,400

500

950

1,900

Break Even point

Timeline

High-Tech Companies in Israel Across the VC Cycle

Cash Flow