What’s Driving Israeli Innovation Right Now?

By Mor Assia

Artificial intelligence and blockchain are possibly the two most influential technologies currently fueling innovation at the moment and are anticipated to create radical shifts in almost every industry. Israeli startups are at the forefront of both of these sectors, receiving notable attention and investments from global players which are further propelling Israeli development in these industries.

AI becoming de facto for scalable companies

Several years ago AI was just a buzzword, but today technology companies must, as a priority for growth, embed machine learning algorithms into their core systems to stay ahead, advance operations and increase performance. AI’s three most notable capabilities include; insight extraction from big data, real time response mechanisms to mitigate and capitalize on events and the opening up of a pandora’s box of product and service innovation.

By the end of the decade AI will become commonplace in our everyday lives, and its potential, especially when it comes to predictive modeling, is already being used in many sectors such as fintech for financial risk modeling and fraud analysis, real estate to draw insights from the abundance of geographic and economic data, and cyber security for anomaly detection. In Israel, the average investment per deal in AI grew 5 times in value, from $2M in 2016 to $10.2M in 2017. Subsequently, the growth in this sector is reflected in the overall investment numbers for AI in Israel, with the market growing from $55M in 2016 to $472M in 2017.

Mobility is a Sector Driven by AI Innovation

Fueling the mobility sector is AI, which is starting to open up a new world of opportunity. Israel is home to hundreds of startups in the field of car technology, from those developing sensors and car safety solutions to  smart city mobility applications. These companies are propelling Israel to the forefront of the rapidly growing field of driverless car technology. AI enables vehicles to process what is going on around them in real time, allowing for a much higher standard of safety and greater possibilities for efficient transportation systems.  

The immense potential in this field is reflected in the rapid growth of automotive companies. In Israel, total investment in transportation and autonomous vehicles grew by 64% from $321M in 2016 to $528M in 2017. Israeli autonomous vehicle companies raised $182M in the first quarter of 2018, in line with last year’s pace. Israel has become a hub for automotive innovation thanks to Israeli founders having very specialist skills and experience in the niche space that sits between hardware and software. The presence of both multinational hardware and software companies in Israel started a while back when such corporations as Motorola, Intel, IBM, HP and many others opened their R&D and production facilities in Israel, allowing a unique skill set to develop locally. Furthermore, experience gained during the military service gives strong exposure to the technology that enables Israel’s military to fly drones remotely, guide and intercept missiles and secure computer systems that are now being deployed in the development of driverless cars.

Israel’s Autonomous Sector is Thriving

The Israeli company, Arbe Robotics, which was founded in 2015, is a global leader in the autonomous vehicle space and is one of the most talked about radar companies in the world. Mobileye that develops vision-based driver assistance systems for collision prevention and mitigation was acquired by Intel in 2017 for $15.3B, making it the most outstanding exit of any Israeli company to date. This was a kickstart to additional acquisitions in the space of Israeli companies including Otto, Argus and Exo. Today, Israel is enjoying a lot of attention from OEMs, including; GM, Ford and VW, automotive tier ones, such as Bosch, Delfi and Harman, and software giants looking to make significant acquisitions in the automotive space in the hope of achieving level 3 and level 4 automation.

Blockchain is Superseding Interest in Fintech

According to a Research and Markets report, the global blockchain market size is expected to grow from $4.5M in 2017 to $7.68B by 2022. Israel’s unique experience with fintech, cyber and cryptography and the close co-operation between science, innovation and finance sectors in the country, has made it a hotspot for blockchain innovation. As a result, there are numerous Israeli entrepreneurs and startups that are developing diverse blockchain projects. In fact, blockchain has become so prominent in Israel, that it has edged out fintech startups and investments.

While there was a decrease in funding of Israeli fintech startups, from $578M in 2016 to $458M in 2017, we believe this funding has migrated from fintech to blockchain. If you look at blockchain investments or if you consider the overall ICO dynamic, in 2017 alone, over $5B was invested in 900 ICOs. Of this, Israel’s contribution was approximately $500M in 17 ICOs, making the average Israeli ICO 6 times larger than its global counterpart. Leadcoin, a company which enables businesses to sell their unused leads and buy leads from other businesses, held the biggest ICO of Q1 in 2018, raising $50M in less than 30 minutes.

Other notable Israeli projects in the finance space include the Saga Foundation, a new asset-based cryptocurrency with advisory council members including a Nobel Laureate and representatives from the world’s largest banks, and Firmo, a project helping to enable the execution of verified financial instruments seamlessly between blockchains. Both have received considerable international attention.

Blockchain has the Potential to Permeate Most Sectors

While fintech has definitely seen the most significant application of blockchain so far, there are many other sectors that stand to benefit from blockchain technology. Some of the technology’s most exciting applications include, increasing transparency and traceability in food and agriculture by creating incorruptible ledgers that trace food pathways. In healthcare, enabling patients to have full control over their medical records, allowing them to share and have the freedom to monetize data for purposes of medical research. In the automotive sector, blockchain is instrumental in autonomous vehicle ownership via tokens with the vehicle as platform, plugged into smart contracts for insurance and leasing purposes.

Currently blockchain is building a parallel world of opportunity, which will at some stage permeate most of the world’s industry sectors once more mainstream adoption has been achieved. As the technology has the capacity to be as big as the invention of electricity or the internet, Israel too has the potential to increase its impact on global innovation by staying at the forefront of development.

Israeli companies in the AI, mobility and blockchain space are currently a magnet for overseas investors from Asia, the U.S and Europe where angels, VCs and institutionals are all searching for groundbreaking innovation. We anticipate this interest to continue to grow as the opportunities in tech further develop.

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