Hi-tech, life-science sectors drive increase in investment
China emerges as a rising player, with $15b. in 4 years
The association of Israel Advanced Technology Industries summed up the year’s trends for the tech ecosystem on Wednesday at the fourth annual Multinational Companies Forum conference at Google’s Tel Aviv campus.
Opened by Prime Minister’s Office director-general Eli Groner and IATI CEO Karin Mayer Rubinstein, the event highlighted the rise in foreign investment in Israeli tech, the future potential of the ecosystem, the contribution of MNCs to Israel and of Israel to MNCs.
“The IATI and its MNC Forum are the voice of the industry in Israel. There isn’t another place in the world where the leaders of the MNCs meet with local leaders and officials in order to promote agendas that directly contribute to the Israeli hi-tech ecosystem and the Israeli economy as a whole,” Rubinstein told The Jerusalem Post.
The IATI is the nonprofit umbrella organization for Israel’s hi-tech and life science industries; its mission statement is to support, represent and advance the Israeli technological ecosystem. IATI’s MNC Forum brings together MNC representatives and leaders in Israel, in particular the heads of the multinational R&D centers located in Israel. The conference drew representatives from multinational companies such as PayPal, IBM, Intel, Mercedes, Microsoft and more, all of whom rely on their Israel-based centers for innovative development.
According to event moderator Prof. Yossi Matias, Google International’s vice president of engineering, the overarching trend of the last decade is the increase in foreign investments in the tech industry. More than $4 billion was invested overall in the past year through 510 different deals; 57% of the investment came from non-Israeli sources. A rising player in Israel-directed investment is China, with more than $15b. invested during the past four years.
“The Americans are already long-time investors in Israel. They know us and rely on us – it’s old news. But now Asia is joining it. It’s true that China is investing everywhere now. But Israel gives added value,” said Matias.
No one was surprised to hear that the leading sector of Israeli hi-tech in recent years is cybersecurity and cyber intelligence. According to Matias, more than 20% of all global investment in the cyber sector happens in Israel. Another sector in the spotlight here is automotive technologies, with companies like Mobileye drawing the world’s largest car manufacturers, such as BMW and Mercedes, to Israel to invest and set up R&D centers. Moreover, Israel is becoming a leader in Internet of Things technologies – with incubators, international joint ventures and academic development of the field.
“In the past two years I see a change. Heads of state from many countries around the world want us. When foreign officials call on the Prime Minister, what they seek is exposure to Israeli tech and innovation. They want exposure to you,” Groner told the participants of the conference.
Despite the data presented at IATI’s MNC Forum, Israeli accounting and consulting firm PwC published its annual recap of the year’s deals. According to PwC’s figures, Israeli start-up exits are slowing down. The total value of exits – both mergers and acquisitions, and initial public offerings – has gone down significantly from $10.69b. in 2015 to $3.5b. in 2016. The average cost of an M&A deal has gone down from $153m. in 2015 to $64m. in 2016.
The seeming slowdown in activity doesn’t really disturb the IATI, which perhaps has a better grasp of how Israeli technologies are doing globally than other actors in Israel.
“First of all, last year was a record year for exits, with deals amounting to more than $9b. I think no one expects to match a world record that soon,” Erez Tsur, co-chairman of IATI, told the Post. “It’s the general trend that counts, not a specific point in time, and the long-term trend here is a clear rise.”
While the MNC Forum focused mainly on the bigger and international tech actors in Israel and not on smaller start-ups, the IATI regards them all as part of the same ecosystem, which the association seeks to promote.
“300 companies hold more than 50% of Israel’s development force, as opposed to about 7,000 start-ups that hold the rest. But start-ups are the ones who set trends that the large corporations then follow. Innovation begins with a start-up that decides, for example, that cybersecurity is a happening field, or automotive tech is the happening thing. They are the vanguard at the front of the camp.”