Tel Aviv Fuels Israel’s ‘Startup Nation’ Reputation

In this week’s edition of PYMNTS’ Weekly Tech Center Roundup, we find ourselves in the thriving tech ecosystem of Tel Aviv — also known as Silicon Wadi (wadi means “valley” in Hebrew) — where there’s way more booming than just cybersecurity.

A FinTech Sector On The Rise

Israel has a well-known reputation of being a global cybersecurity hub — increasing talent flow from military intelligence, exposure to severe security threats and a burgeoning startup scene all combine to make the country a cybersecurity power player.

Though there’s been a governmental focus on securing Israel’s spot as a leader in cybersecurity, that doesn’t mean the country is a one-trick pony. According to Special Counsel, Adv. Roy Keidar of Yigal Arnon & Co. law firm, the Israeli FinTech industry has skyrocketed since 2009. In just six years, Keidar explained, the industry has grown from 90 startups to 430 companies, with 60 of those raising approximately $370 million as of 2014.

Though Israel’s small size and distance from other global markets do provide barriers to growth, Keidar noted that advancements across the “creative and fast-growing” FinTech industry are helping to fuel solutions in what can be described as one of the most highly regulated and conservative industries in the world.

“Israeli expertise in cryptography and Big Data, gained in the world of security and defense, is now proving itself useful in the financial world, allowing for better, safer and more efficient ways to perform trusted transactions without intermediaries,” Keidar said.

The country’s growing FinTech market is quickly catching the eye of major companies from around the world.

U.K. banking giant Barclays recently launched its Barclays Accelerator in Tel Aviv, marking the ongoing race to capitalize on what some are calling the “hottest FinTech scene.” Barclays, in cooperation with Techstars, will use the program as a vehicle to bring industry knowledge and experience directly to the entrepreneurial ecosystem within the city.

Barclays says that it’s offering a wealth of money-can’t-buy knowledge and experience in the city’s vibrant entrepreneurial ecosystem.

Of the 2,000 startups around the world that applied to the program, only 40 were selected, and just 10 of those are located in Tel Aviv: Bstow, Civilize, Corr.bi, CyberDriveWare, FinancialJuice, Samurai, SlidePiper, Vala, Wisor and B2B Pay.

Acceleration In the Startup Nation

Because it has more startups per capita than any other place in the world, Israel has gained the nickname “startup nation.” With many startups around, it’s no surprise that many accelerators and incubators have popped up across the country as well.

However, a recent report from Geektime takes an in-depth look at whether the success of the startups coming out of the country really has anything to do with the presence of these support systems or not. The startup ecosystem in Israel exhibited unprecedented growth in 2015, but is the abundance of accelerators and incubators still relevant in the country’s market? If so, which one is helping startups the most?

The research shows that, of the 14 active incubators and 43 active accelerators included in the report, “an early stage startup that was accepted to an incubator program in 2015 has a 2.7 times higher probability to raise a follow-on investment than an accelerator graduate,” the firm explained. According to 2015’s data, graduates of incubators showed a better rate of success throughout the startup lifecycle, which includes funding and exits. The interesting thing is: A startup in its early stage is 2.5 times more likely to gain acceptance into an accelerator versus an incubator.

All incubators in Israel are supported by the Office of the Chief Scientist (OCS), which the report confirmed was given a total sum of governmental funding of $167 million for 300 startups between the years 2011 and 2015.

One Israeli-based cybersecurity startup, Demisto, closed $6 million in its Series A funding round, with plans to expand partner integrations and boost sales and marketing initiatives. The company uses a chat-driven, bot-powered interface for security to help address the widening skills gap in many security operations teams.

CEO Slavik Markovich said the startup is on a mission to “make the life of security operations analysts productive and impactful, while helping scale scarce security talent for our customers.”

In an effort to boost medtech development and innovation in Israel, Mayo Clinic announced an initiative to better collaborate with and reach the country’s medical device companies. According to Mayo, Israel has a strong medtech industry, with a high number of doctors per capita, making it an ideal location to accelerate innovation through its Mayo Clinic Israeli Startup Initiative.

“Israel is recognized for being such a hub for biotech and life sciences. It’s a powerhouse in its own right, truly the Silicon Valley in that part of the world,” Duska Anastasijevic, Mayo’s international relations consultant, explained. The program has a two-part focus: commercializing Israeli health care tech in order to bring it to the U.S. and accelerating the availability of medical innovations.