Israel's AI arena reaches more than 1,100 companies - report

“The Israeli innovation ecosystem is in the midst of a period of strong growth,” said Start-Up Nation Central CEO Prof. Eugene Kandel.

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March 11, 2019 10:22
2 minute read.
Worker tends to systems in autonomous vehicle at Mobileye plant (REUTERS/Ronen Zvulun)

Worker tends to systems in autonomous vehicle at Mobileye plant (REUTERS/Ronen Zvulun). (photo credit: REUTERS/Ronen Zvulun)

 
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Israeli artificial intelligence technology start-ups enjoyed a “stand-out year” in 2018, according to a report published Monday by Start-Up Nation Central.

From 2014 through 2018, Israel’s AI arena grew from 512 companies to 1,150, according to the nonprofit organization’s “State of the Israeli Ecosystem” report. These include businesses developing core technologies and those utilizing AI in the development of products and services in such fields as healthcare, cybersecurity and autonomous driving.

Last year, AI-related companies constituted 16% of all active Israeli tech companies, and benefited from 32% of all funding rounds and 37% of all capital raised. Companies raised a total of approximately $2.25 billion, a record-breaking year and almost $1b. more than the total capital raised in 2017.

Salesforce became the most expensive AI-related acquisition in 2018, when the Tel Aviv marketing intelligence platform was acquired by California-based Salesforce for $850m.

Nutrino, acquired for an estimated $100m. by Medtronic, and BriefCam, purchased for $90m. by Canon, were among the year’s other significant acquisitions.

“The Israeli innovation ecosystem is in the midst of a period of strong growth,” said Start-Up Nation Central CEO Prof. Eugene Kandel.

“2018 was another year in which we saw this ecosystem produce great companies and cutting-edge technologies,” Kandel said. “Another indication of this is the growing presence of the world’s leading companies in Israel. In every year over the last decade, more than 20 new R&D centers of multinational companies opened shop in Israel, many of them through acquisitions.”

It was also a strong AI-related year for multinationals in Israel, underlined by Intel’s planned $11b. investment in a new chip-making plant in Kiryat Gat, and the establishment of a center for artificial intelligence in partnership with the Haifa’s Technion-Israel Institute of Technology.

Global tech giants Google, IBM and Microsoft all relied on their Israeli research and development centers to produce new AI products that were unveiled last year.

“Many MNCs are changing how they work with Israeli innovation and increasingly engaging in open innovation with the entire ecosystem, as well as, or instead of, acquiring Israeli start-ups,” said Kandel.

“This is a very positive trend, as the ecosystem must have a balance between both MNCs and local companies.”

Some 645 Israeli start-ups throughout the hi-tech sector raised $6b. across 681 funding rounds last year, breaking the record $5.2b. set only a year earlier.

Nearly 1,500 investors from more than 30 countries invested in Israeli companies, with Israeli and American investors participating in most deals. The United Kingdom, Germany, China and Japan maintained their single-digit rate of involvement.

While the total number of active hi-tech companies continues to grow steadily every year – now exceeding 6,600 – a growing layer of maturing companies has formed, reflecting global trends. The median size of Series B investment rounds has increased by 75% since 2014 from $10m. to $17.5m.

The support system underpinning much of the hi-tech sector’s success continued to grow in 2018, with 22 new hubs opened during the year. Today, there are more than 220 active incubators, accelerators and co-working spaces across the country.

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