They scale up so fast: a misty-eyed Tel Aviv watches its start-ups grow

A new report uncovers the record-breaking nature of Tel Aviv’s start-up industry, which has begun scaling up in a major way

 Tel Aviv scale-up cycle (photo credit: Tel Aviv Innovation Ecosystem)
Tel Aviv scale-up cycle
(photo credit: Tel Aviv Innovation Ecosystem)

Last year, Tel Aviv was declared the world’s most expensive city by Fortune magazine, and while it surely costs an arm and a leg to make it there, it is home to one of the country’s most prosperous industries.

For over a decade, Tel Aviv has been viewed as a hi-tech hub in the Middle East. Since 2021, Tel Aviv’s start-up scene is continuing to blow up, and more critically, a large number of its start-ups are maturing, according to a recent report published by the Tel Aviv-Jaffa Municipality’s Center for Economic & Social Research, Tel Aviv Global & Tourism and IVC Research Center.

In 2021, Tel Aviv saw a 42% spike in its number of scale-up companies (amounting to a total of 228), and the industry’s global headcount nearly doubled, reaching 150,000 workers. This is a strong indicator that the city is not only birthing new start-ups like wildfire, but many of those companies are achieving enough success to grow up.

Going hand in hand with the industry’s maturity is its ability to make money: In the past five years, the capital raised by tech companies in Israel increased tenfold. Last year alone saw a record-breaking $20 billion in capital raised by Tel Aviv-based tech companies, of which there were 2,947 – a whopping 32% of all tech companies in the country, which makes Tel Aviv the true beating heart of the Start-up Nation.

Co-founder of the Start Up Nation Mentorship Program, Adam Shapiro, facilitating a panel at the public international launch event in New York City (credit: SHAHAR AZRAN)Co-founder of the Start Up Nation Mentorship Program, Adam Shapiro, facilitating a panel at the public international launch event in New York City (credit: SHAHAR AZRAN)

Fintech and cybersecurity were the most prosperous verticals of the 34 listed in the report, and according to the charts, everyone and their grandma is implementing artificial intelligence these days: 29% of Tel Aviv tech companies utilize AI tech, making it the most commonly seen core technology.

As well, Tel Aviv is doing well globally: As reported earlier in the year, 2021 was a record-breaking year for foreign investments in the Israeli tech scene, and Tel Aviv was right at the center of it all: More than 780 foreign investors poured a total of more than $15b. into the city’s tech companies – a 209% year-over-year growth of foreign capital.

How is the city of Tel Aviv capitalizing on the start-up boom?

Amid the blazing success of Tel Aviv’s tech ecosystem, the municipality is launching a new initiative, dubbed “Tel Aviv Tech” – a program to promote professional training for residents to integrate them into the industry, solve bureaucratic challenges, attract investors and multinational companies to the city and foster Tel Aviv’s international reputation as the “Start-up City.”

Mayor Ron Huldai elaborated on the strategic goal of the program.

“Through direct engagement with ecosystem players, partnerships, pilots, inclusive training programs and more, we are forging the relationship between the industry, the city and its residents, laying the groundwork for the shared prosperity of tomorrow,” he said. “In this way, the city will continue to perform its role as a creative space and source of inspiration.”

In the past year, I have visited a variety of tech companies in Tel Aviv, from new start-ups developing groundbreaking technologies, to scale-up companies with products that are already widely used around the world,” Huldai said. “The creative spirit of the city and its entrepreneurs never stop innovating, imagining and developing. I believe that the ideas born here today will change the world tomorrow.”