Trading cash for talent T



el Aviv’s tech sector is booming. Despite the pandemic, start- ups in Israel raised record

amounts of investment and produced 19 initial public offerings in 2020. But this growth has not hap-

pened overnight. “Israel’s exports in the 80s and early 90s were pretty much all agriculture,” says Eze Vidra, a managing partner at Remagine Ventures, a venture capi- tal (VC) fund focused on early-stage Israeli start-ups. Today, Israel boasts the largest

number of start-ups and VC per cap- ita. Tel Aviv is hometo tech ‘uni- corns’ including cyber security com- pany Wiz and games developer Moon Active. But these companies are not

alone. ‘SiliconWadi’—the name given to the country’s high-tech clus- ters mostly found around Tel Aviv— has birthedmore than 50 tech uni- corns in the past fewyears.

Jobseeker’smarket Unlike other ecosystemsstruggling with access to funding, Israel is grap- pling with an entirely different issue. In recent years, hundreds ofmul-

tinationals have set up research and development (R&D) centres in Israel. Thismass arrival has caused a grow- ing shortage—and surging costs—of labour. “For so long, Tel Aviv was suffer-

ing froma shortage of funding; now it’s dealing with a shortage of local talent,” adds Mr Vidra. According to a 2020 report by

Startup Nation Central, the number of open positions rose to 18,500 in mid-2019—up by 8% on the previous year. The report also noted that ris- ing demand was outpacing the inflowof new recruits. Doron Myersdorf, chief executive

of StoreDot, a lithium-ion battery company based in Herzliya, a city in the northern part of the Tel Aviv District, echoes this.“We continu- ously seek talent outside of Israel as there is limited availability of top researchers—especially in chemis-


Governmentintervention Although the entire global tech industry is tied to military innova- tion, the links are slightlymore pro- nounced in Israel. “In the 2000 tech boom,wewere

all focused on telecom equipment because the military was so focused on developing infrastructure. Fast- forward to today andweare all focused on data and artificial intelli- gence, since that has become essential for Israel’s security,” saysMrBarak Rabinowitz, a managing partner at F2, another early-stageVCfund. The government has played a piv-

StoreDot chief executive Doron Myersdorf

try, electrochemistry, materials and the scale-up of battery manufactur- ing,” he notes. Israel announced a unique visa

programmethatmade it easier for foreign nationals to work there in 2015. However, despite the country’s best efforts to lure in labour from overseas, attracting international tal- ent is not easy. “If the candidate has some affilia-

tion to Israel it helps with the pro- cess. However, Israel is not themain relocation target for top talent due to the geopolitical climate and lan- guage barrier,” adds Mr Myersdorf. Be in Tel Aviv (Beta), a tech talent

relocation programmefounded by several Israeli tech companies, is try- ing to plug the gap by offering gener- ous relocation packages to prospec- tiveemployees. As part of its offer- ing, Beta pledges to provide up to $20,000 as a relocation bonus, an annual round trip flight home, and housing for the first six weeks. Tech giants—which have con-

tributed to the shortage of local tal- ent—are also getting creative. US chipmaker Intel has leveraged the power of the internet of things to keep existingemployees happy and attract new hires. Its development centre houses a smart gym and is fit- ted with 14,000 sensors tomonitor light,movement and air quality.

otal role in thematuration of the ecosystem. VC has benefited greatly fromgovernment initiatives offering tax cuts to tech companies, and reduced bureaucracy formergers and acquisitions. The Yozma programme, now

knownas the Israel Innovation Authority, has boosted VC activity in the country and supported thou- sands of innovation projects. Additionally, PitchBook’s ‘Israel

Private Capital Breakdown 2020’ report notes the country consist- ently invests a significant percentage ofGDP and R&D every year.

The funding landscape Funding is on the rise, too. VC money hovered around the $1bn mark from 2010 until 2015, hitting $2bn in 2016, and peaking at $4.1bn in 2019. Private equity volumerose to

$6bn in 2016 and remained well belowthat in subsequent years. Activity remained resilient in the

first half of 2020, posting its best H1 deal and volume figures in over a decade—24 transactions worth a col- lective $2.9bn—representing year- on-year increases of 48.3% and 16.2% respectively. The steady supply of funding

means Tel Aviv’s entrepreneurs are able to gainmore of an equal footing and, internally, is a massive confi- dence boost for the sector. “The founder’s mindset has

evolved. They are no longer aiming April/May 2021

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