AI-based startups thrive in Israel as investments and interest surge

Israel was home to 1,150 artificial intelligence companies at the end of 2018, up almost 125% from 2014, report shows

Shoshanna Solomon was The Times of Israel's Startups and Business reporter

Illustrative image of robots and artificial intelligence (AI) (Phonlamai iStock by Getty Images)
Illustrative image of robots and artificial intelligence (AI) (Phonlamai iStock by Getty Images)

Artificial intelligence-based technologies in Israel saw significant growth in 2018 in the number of companies raising funding, the amounts invested, and the new products released, a report by Start-Up Nation Central shows.

Israel was home to 1,150 artificial intelligence companies at the end of 2018, up almost 125 percent from the 512 companies in 2014. These include companies that develop core AI technologies as well as companies that use  such technologies for healthcare, cybersecurity, autonomous driving and other purposes.

The report shows that AI-related companies accounted for 17% of the total number of 6,673 active Israeli tech companies in Israel tracked by Start-Up Nation’s Finder database.

Some 32% of all funding rounds and 37% of total capital raised went to AI-related companies, a 94% increase from the number of funding rounds raised by AI-related companies in 2014 and an 85% increase in the amount of capital raised. The total capital raised by AI companies in 2018 was a record $2.25 billion, more than triple that raised in 2014, $516 million.

The sector in Israel has also garnered international interest, the report said, with Intel setting up a new Center for Artificial Intelligence with the Technion Israel Institute of Technology, in Haifa; and companies including Google, Microsoft and IBM unveiling Israel-made AI-based technologies, such as IBM’s debater project. Nvidia, the US chipmaker, said in October it was opening an AI-based R&D center in Israel.

During 2018, 645 Israeli high-tech companies raised a record $6 billion in 681 funding rounds. The dollar amount was up 15% from 2017 and 140% from 2014, the report said.

The median size for deals in 2018, including all round types, was some $4 million, up 33% from 2017 and indicating a maturing of the industry.

The most prominent early stage investors in Israel’s tech scene are from Israel and the US, followed by the UK, Germany and China, the data showed. In later stage investments, the most prominent investors were from the US, Israel, China, the UK and Japan.

In 2018, there were 97 exits — a company sale or an initial public offering of shares —  for a total of $3.28 billion, the data showed.

According to the report, there are some 320 multinational companies active in Israel, of which more than 300 have R&D activities at 360 sites. The vast majority of multinational activity in Israel is from the US, followed by Germany and the UK.

In 2018, Israeli cybersecurity-related technologies accounted for 20% of the total capital raised, double that of 2014. The Data Protection and Privacy subsector was the fastest growing subsector in Israeli cyber activity.

Digital health companies raised $543 million in 2018, with 85% of those companies utilizing some form of AI technology. Some 42 out of 70 investment rounds in the digital health industry went to AI companies, the data showed.

Last year, 2018, was also a record-breaking year for fintech investments, with $832 million raised in 82 deals by Israeli fintech companies, almost double the total amount raised during 2017.

Most Popular
read more: