Israel's 'startup boom' has grown unfettered for
decades. Its emergence as a nation of opportunity for business
creation and innovation came not by accident, but through careful
planning, tendency to think 'outside the box' and constant
strive towards execution. All of which have been accomplished due
to ability of Israel to support and grow qualified and innovative
individuals. After years of steady growth, though, the country now
faces some challenges to its positioning in the technology sector. Shortages in their high-tech
labor pool and a need for companies to grow more within the country
are forcing adjustments. How Israel navigates these concerns will
have a significant impact on the year ahead for high-tech
Challenges in Human Capital
One significant challenge area lies in the need for more qualified
personnel. Israel trains thousands of individuals through
compulsory Israel Defense Forces service, but tech sector growth
has created a need for much more. Scientific and mathematical
degrees earned have leveled off; the proportion of scientific and
technical degrees among overall college degrees has dropped below
10 percent in recent years.
As a result, the supply is not keeping up with the continued demand
for more workers in this area. Current trends suggest a shortage of
10,000 engineers and programmers in the coming decade. After 13
years of continued growth in Israel's economy, investment and
national leadership will need to focus on reversing these trends to
develop a labor pool that keeps up with the appetite for national
Need for Companies to Mature
Another issue for those looking to invest in Israel to consider is
the increasing exit costs for businesses. New regulation and tax burdens now create incentives for companies
to develop further before exiting the economy. Where short-term
investments and profitable exit strategies once carried the day,
your investment focus now should move toward a longer plan,
increasing profitability over years rather than months. The
government is developing plans to create new growth paths; as with
any maturing nation, these will work to marry growth to stability.
In the coming year, those who invest for the long term will find
greater high-tech opportunities.
As the regulatory and taxation systems change in Israel, you
need experienced legal and consulting assistance to guide your
strategy. Barnea & Co. can help lead you through the new paths
to growth in Israel.
Originally published August 22, 2016
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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