Banner year for Tel Aviv City, Tech startups, and multinationals
With a population of 460.000, Tel Aviv is home to 29% (2750 businesses) of all Israeli technology companies, 115 international R&D facilities, and 20 unicorn firms, 14 of them exceeding the $1 billion valuations in 2020 alone.
According to the Tel Aviv Innovation Ecosystem study issued today by Tel Aviv-Yafo Municipality and IVC Research Center, despite the global pandemic, 2020 was a formidable year for the Tel Aviv tech scene by any parameter.
• Tel Aviv-based technology companies employed 20% of the Israeli tech workforce and accounted for roughly half of overall investment and exit value.
• In 2020, investments in Tel Aviv technology companies increased to $6.8 billion, 34% higher than in 2019 and accounting for 48% of all Israeli technology company investments.
• Foreign investors accounted for 68 percent of all investments in Tel Aviv-based businesses.
• Tel Aviv-based technology business exits totaled a record $4.43 billion in 2020, a 20% increase over 2019 and 46% of all exits by value.
• Over the last five years, Tel Aviv’s IT sector has grown by 25%, outpacing Israel’s overall growth of 16%.
In the newly released Global Startup Ecosystem Index 2021 by Startupblink, Israel ranked third globally, after the US and UK, while Tel Aviv ranked eighth among cities with a technology ecosystem.
Tel Aviv, Israel’s high-tech hub, is one of the world’s most innovative and technologically advanced cities. Talented and innovative individuals, innovative technology companies, venture capital funds, and other investors; accelerators, multinational corporations, financial institutions; service providers, and leading universities are all in proximity, forming an ebullient and successful ecosystem. Regardless of the global epidemic, 2020 was a banner year for Tel Aviv’s innovation scene on all fronts.
“The Tel Aviv-Yafo innovation ecosystem breaking many records. Outstanding human capital is one of the main reasons for the success of the ecosystem,” said Mayor Ron Huldai. “Tel Aviv’s talent is a magnet for multinational corporations and foreign investors who join the growing local scene of innovators. The tech industry demonstrated its value to our city and country throughout this challenging year, while its cutting-edge ideas and developments remain at the forefront of global innovation. Tel Aviv-Yafo will remain an international center of attraction for human capital and financial capital.”
Tel Aviv investors
Between 2016 and 2020, the number of Tel Aviv-based investors increased by 44 percent, led by venture capital funds and investment organizations. Tel Aviv saw a surge of 89 percent in the number of venture capital funds and a 70 percent increase in the number of venture capital management organizations, according to the research. Foreign investors account for 68% of all investors in Tel Aviv-based enterprises in 2020. These investors represent 35 different countries. Investors based in the United States are the most active, followed by those based in the United Kingdom, China, and Germany.
Investments and Exits from Tel Aviv-based Businesses
In 2020, a record $6.839 billion will be invested in 416 Tel Aviv-based businesses. This represents 48% of overall investments in Israel and represents a 34% increase over 2019. Over the last three years, the average round has tripled from $5.1 million to $16.4 million.
According to the research, 60% of investments in Tel Aviv enterprises went to scale-ups, while 30% went to pre-scale companies. Early-stage enterprises received less than 10% of total capital, under the national trend.
Tel Aviv enterprises exited for $4.43 billion in 53 transactions, a massive increase from the $883 million from 36 exits in 2016.
In 2020, three Tel Aviv-based companies will complete initial public offerings on the NYSE, Nasdaq, and Euronext.
Tel Aviv tech companies by stage
The Tel Aviv Innovation Ecosystem Report analyzed Tel Aviv tech companies by stage of growth. Out of 2865 tech companies in Tel Aviv, 50% are start-ups, 40% are in mid-stages or pre-scale, 6% are scale-ups and mature companies, and 4% are foreign R&D centers of multinational corporation (MNCs). * (see methodology for stage definition)
Though Tel Aviv scale-up companies account for only 6% of tech companies, they employ 54% of the workforce in the Tel Aviv tech ecosystem. This ecosystem is displaying an increasing level of maturity as 14 new Tel Aviv unicorns were born in 2020 bringing the total to 20. Tel Aviv unicorns’ joint valuation reached $33 billion.
The report also indicates a significant growth of 25% in the number of active companies over the past five years, much higher than the 16% increase in Israel in that timeline.
Tel Aviv tech companies by leading tech clusters
An assessment of the Tel Aviv tech ecosystem by type of technology shows that the city is in continuous transition, from start-up city to deep tech capital. The leading tech clusters in Tel Aviv in 2020 were AI (Artificial Intelligence), Fintech, Big Data, and SaaS. AI is the leading tech cluster in Tel Aviv, capturing 43% of all Israeli AI companies followed by Fintech companies (42% of all Fintech companies). AI and cybersecurity cluster are the leaders in terms of investments and exits’ volume.