Now is the best time to invest in Israel - opinion

Israeli innovation has always thrived in adversity. As a country that has faced numerous crises – from wars to economic recessions to global pandemics – Israel has consistently emerged stronger, its start-up ecosystem more dynamic than ever. 

The past year, marked by the devastating events of October 7 and the subsequent wars in Gaza and Lebanon, may seem like an unlikely time to bet on the Start-Up Nation. But history shows us that Israel’s darkest hours often give rise to its most groundbreaking innovations. 

Now is no different.

The pattern of growth amid crisis

Consider the aftermath of the Second Lebanon War in 2006. At the time, Israel’s economy faced significant challenges, yet it saw a surge in technological advancements. 

An analysis by Start-Up Nation Central reveals that Israel’s tech sector not only withstood the immediate impacts of the conflict but also experienced substantial growth in the ensuing years. Companies like Waze, the navigation app acquired by Google for over $1 billion, were founded in the years following this conflict. 

Similarly, during the 2014 conflict in Gaza, for instance, the demand for advanced cybersecurity solutions led to a surge in innovation, with Israeli companies securing nearly 20% of the global cybersecurity market by 2018. These achievements are not accidental; they stem from a mentality that views every crisis as a proving ground for ingenuity.

The 2008 global recession, which wreaked havoc on economies worldwide, was a fertile period for Israeli start-ups. Many of today’s unicorns – companies like Fiverr, known for revolutionizing freelance work, and Taboola, a leader in online content recommendation – were founded during or immediately after this financial downturn. 

These examples illustrate a consistent trend: periods of instability are often followed by waves of entrepreneurial ingenuity in Israel.

The COVID-19 pandemic further underscores this phenomenon. Despite the global economic downturn caused by COVID-19, Ynet News reports that Israeli start-ups raised a record $9.3 b. in 2020. This momentum continued into 2021, with the first quarter alone seeing $5.5 b. in investments – more than double the amount from the same period the previous year. 

Companies like Diagnostic Robotics and K Health rapidly expanded, while verticals like AI and telemedicine received record funding. By 2021, Israel’s tech sector had broken all previous records, raising over $25 b. in venture capital – a testament to the ecosystem’s ability to pivot and innovate under pressure.

A unique culture of agility

What makes Israel’s start-up ecosystem so uniquely capable of turning crises into opportunities? 

Part of the answer lies in its culture of agility. In a nation where uncertainty is a constant, entrepreneurs are hardwired to adapt. 

The Israeli military, with its emphasis on problem-solving and rapid decision-making, plays a pivotal role in fostering this mindset. Founders learn to tackle challenges head-on, often applying their experience from elite military units to the business world.

This culture isn’t just about reacting to change; it’s about anticipating it. Israeli founders are known for their ability to identify emerging needs and address them with disruptive solutions. 

The investment opportunity

For investors, this track record of growth amid adversity offers a compelling opportunity. By continuing to back Israeli start-ups, investors position themselves at the forefront of the next wave of global innovation. 

Israel’s tech ecosystem is poised to tackle some of the world’s most pressing problems, from climate change to AI to global health. In recent months alone, we’ve seen Israeli start-ups making strides in areas like carbon capture, autonomous transportation, and personalized medicine. 

These developments underscore the enduring strength of the ecosystem and its ability to deliver outsized returns, both financially and socially.

A call to action

As Israel faces one of the most challenging periods in its history, the need for continued investment in its innovation ecosystem has never been greater. History teaches us that this is precisely the time to double down, to believe in the transformative power of Israeli ingenuity. 

By supporting the entrepreneurs who are building the next generation of world-changing companies, investors can reap significant rewards and play a vital role in shaping a brighter future for Israel and the world.

The Start-Up Nation’s greatest strength has always been its ability to thrive under pressure. This year will be no different. Let’s ensure that the innovations born out of today’s challenges become the foundations for tomorrow’s breakthroughs.

The writer is managing partner of lool ventures.