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How Israel Became The Startup Nation Having The 3rd Most Companies On The Nasdaq

  • Israel is the startup hub, with thousands of startups even though it only has 9M people.

  • Israel was once an economic crisis, however by introducing free markets many Israelis who were in the military used their knowledge to start a startup.

  • Israel has the 3rd most companies listed on the Nasdaq, after the US and China.

Israel is a very new nation being founded in only 1948. They've also had many conflicts in their short history, both externally and internally. In the 1980s, Israel had very high inflation going up to the triple digits. Israel is a very small country having a population of only 9M people and being geographically small ranking 150th by area. Israel has been lacking in natural resources, especially when compared to oil-rich countries of the middle-east (although offshore energy discoveries have recently been found). Over half of the country is a desert. However, today they're a global tech and startup hub.

The first acquisition outside of the US made by Buffet's Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) was an Israeli company called ISCAR Metalworking in 2006 when he obtained 80% of its stock. Israel is now one of the best countries to invest in according to Warren Buffet, who called it the "most promising investment hub outside the US. If you're going to the Middle East to look for oil, you can skip Israel. If you're looking for brains, look no further. Israel has shown that it has a disproportionate amount of brains and energy".

Israel spends the most of any country on R&D as a percentage of GDP, at 4.3%, than any other country in the world. In comparison, the US is ranked 9th and only spends 2.8%. South Korea spends the 2nd most at a close 4.2% but other than South Korea no other country comes close to Israel with the 3rd country being Japan spending 3.3% of its GDP.

The country has thousands of tech startups and many large multinational tech companies having subsidiaries or R&D centres in Israel. Intel employs 10,000 employees directly and the employment of 30,000 is indirectly supported by Intel, with some of their processors being designed and made in Israel.

Israel is one of the world's hubs for diamonds, especially diamond polishing, with diamonds being one of their biggest exports. If diamonds were to lose all their global demand because of economic issues or changing consumer choices that could harm Israel's economy as diamonds are a large part of its trade.

Israel, however, is much more than just diamonds. Israel's exports are dominated by high-tech industries, making up 49% of exports. They also export pharmaceuticals and are home to generic drug maker Teva Pharmaceuticals (TEVA). Israel is also home to many smaller R&D focused biotech companies. Israel also exports Integrated Circuits and other Silicon devices such as processors (Intel manufactures some processors there). Israel also has thousands of startups which are working on researching and developing the next generation of technology which should fuel future growth.

GDP is expected to grow between 3¼ and 3½ per cent in 2018 and 2019. The ongoing support from macroeconomic policies will continue to stimulate demand. Demand will also be supported by increased infrastructure spending related to the start-up of the Leviathan offshore gas field planned for end-2019. The good labour market performance and low unemployment should continue to spur wages and private consumption. However, the increase in imports, coupled with the still moderate growth in exports, should slow growth. With stronger wage increases and higher import prices, inflation is expected to rise to around 1¾ per cent by the end of 2019.

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