The number of startups operating in Jerusalem has jumped 102 percent since 2012, to 405, indicating that the capital has become “a magnet for entrepreneurial activity and cutting edge innovation,” newly compiled data shows.
The numbers were released ahead of Jerusalem Day, which falls on May 22, and commemorates the unification of the city in the aftermath of the June 1967 war. They were compiled by Start-Up Nation Central, based on its Finder database, in partnership with the Jerusalem Development Authority, the Ministry for Jerusalem and the Jerusalem Institute for Policy Research.
Start-Up Nation Central is an independent nonprofit organization that aims to strengthen the Israeli tech industry.
In 2019, investors pumped $233.5 million into Jerusalem-based companies and startups, a 21% increase from the previous year, according to a statement.
The city has seen, since 2012, 22 exits — defined as mergers and acquisitions or initial public offering of shares — and investments adding up to $1.6 billion.
Israel’s largest tech exit in history was the acquisition by Intel Corp. of the Jerusalem-based company Mobileye for $15.3 billion in 2017. Another Jerusalem company, Lightricks, a maker of photo and video editing apps, reached a one-billion-dollar valuation, thus becoming a so-called tech “unicorn.”
Most Jerusalem-based startups are considered small to medium, with 92% of them employing fewer than 50 workers. Eighty-six percent of Jerusalem-based firms offer business to business products, the data shows, and 54% of them have already started selling their products.
“Jerusalem’s tech sector has not only grown dramatically in the past eight years but can serve as a model for an emerging global tech hub,” said Wendy Singer, executive director at Start-Up Nation Central, in a statement. “Producing some of Israel’s standout unicorns has been Jerusalem’s calling card. This proves there are ecosystems developed outside of Israel’s Center that can prosper, and function – and be part of the economic growth in Israel’s periphery.”
A number of factors has helped Jerusalem’s startup ecosystem thrive, Start-Up Nation Central said. Technology prospers with diversity, and Jerusalem has a diverse population, made up of secular and religious people, Jews and Arabs, new immigrants, men and women.
Drawing on the city’s diverse demographic makeup, there has been a movement to train and integrate the Arab Israeli and ultra-Orthodox communities into the tech sector.
In addition, Jerusalem is home to world-ranked academic institutions like the Hebrew University of Jerusale and the Bezalel Academy for Arts and Design. The city has a strong leaning toward life sciences, and Jerusalem-based students constitutes a quarter of all students in Israel studying in this field, the statement said.
“The nexus point between technology, design, and science results in great creativity and human capital,” the statement added.
Lastly, a coalition between government, nonprofits and academia has played a part in strengthening the city’s tech sector, creating events and innovation hubs, accelerators and entrepreneurship programs.
Among 405 Jerusalem-based startups, two fields predominate: life sciences and artificial intelligence startups.
The Start-Up Nation Central data did not address the current situation of startups and how they are coping with the coronavirus pandemic. Four out of every 10 startups will die in the next three months if they don’t raise additional funds, according to a report by research firm Startup Genome that looked into the impact of COVID-19 on startup ecosystems around the globe.
Israel’s tech industry has been “significantly afflicted” by the coronavirus lockdown and is expected to see a drop of some 25% in private capital investments and about a quarter in total revenue, the Innovation Authority said in April.