Tel Aviv-Jerusalem ranked world's 6th strongest start-up ecosystem

The report also praised the number of start-ups per capita in Tel Aviv, the highest in the world after Silicon Valley, as well as the country's response to the coronavirus outbreak.

A general view shows part of Tel Aviv amid an ease of restrictions following the coronavirus disease (COVID-19) in Israel May 7, 2020. (photo credit: AMIR COHEN/REUTERS)
A general view shows part of Tel Aviv amid an ease of restrictions following the coronavirus disease (COVID-19) in Israel May 7, 2020.
(photo credit: AMIR COHEN/REUTERS)
The start-up ecosystem in Tel Aviv-Jerusalem was ranked sixth worldwide in the Global Startup Ecosystem Report for 2020 (GSER 2020), tying with Los Angeles.
The report was conducted by Startup Genome, and is among the world's most comprehensive and practical research reports on the success and performance of start-up ecosystems.
In their deep dive on the ranking of the Tel Aviv-Jerusalem ecosystem, the report discussed the particular strengths of the sub-sector, such as cybersecurity and research in artificial intelligence (AI), big data and analytics.
Regarding cybersecurity, the report noted an annual export of cybersecurity products totaling $6.5 billions, and that it was the first country to offer a PhD in cybersecurity, as well as being home to six different cybersecurity university research centers.
In addition, the report noted that Israel ranks third worldwide in the total number of AI start-ups, many of which are the among the field's leading firms.
The Israeli ecosystem is valued at $47 billion with early stage funding totaling at $3 billion. For comparison, the global average for these values are $10.5 billion and $431 million, respectively.
The report also praised the number of start-ups per capita in Tel Aviv, the highest in the world after Silicon Valley, as well as the country's response to the coronavirus outbreak.
This is especially relevant for the report, which emphasized the impact the coronavirus pandemic has had on start-ups worldwide.
"As the COVID-19 crisis hit across the world, start-ups have found themselves in a double bind, being hit hard from two main shock waves: capital shock and demand," the report states. "Four out of every 10 start-ups today are in the red zone: they have three months or fewer of capital runway. This means that they will collapse if they do not raise additional capital and their revenues and expenses remain unchanged, risking a mass extinction event for startups globally."
It is also possible, the report found, that the coronavirus crisis could in fact lead to a new boom for new and innovative companies who can seize the opportunity.
"Every crisis creates opportunities, and this crisis is no different," the report says. "For instance, over half of Fortune 500 companies started during a contraction. Over 50 unicorns [start-ups valued over $1 billion] were created in the Great Recession alone, as Startup Genome data shows. The list of companies funded during the Great Recession is impressive. It includes Facebook, LinkedIn, Palantir, and Dropbox... This shows the need for funding start-ups during down periods.
"Start-ups contribute meaningfully to both local communities and to the global start-up economy as a whole. With that in mind, policymakers should be focused on helping start-up companies get through COVID-19 intact. Start-ups need help now and if policymakers don’t work to support them, the economic effects will be dire."
However, Israel's government worked hard to keep start-ups afloat with supportive measures.
"The Israeli government announced an NIS 1.5 billion support plan, which includes NIS 650 million as 'first aid' to small and medium-size companies through the Israel Innovation Authority's [IIA] grants and programs," the report states. "Other initiatives are focused on backed loans for companies in need of funding, and encouraging the entrance of institutional investors into the market."
The reason for this, IIA CEO Aharon Aharon explained, is because "It is well understood, even by the Finance Ministry, that the hi-tech industry in Israel holds the key to pulling us out of the economic crisis following the coronavirus pandemic."
Altogether, the funding and the density of start-ups in the ecosystem are cited as enticing reasons for companies to move to the Tel Aviv-Jerusalem ecosystem.
As was the case in 2019, the top seven ecosystems in the ranking remained the same, having a combined value of $1.5 million, nearly double the other top ecosystems.
The top slot on the list remains Silicon Valley in California, followed by a tie between New York and London. Beijing came in fourth, followed by Boston in fifth.
Rounding out the end of the top 10 was Shanghai at No. 8, Seattle at No. 9 and Stockholm at No. 10.
The report in total ranked the top 30 and 10 runner-up global start-up ecosystems, as well as 100 emerging ecosystems.