High-tech startups in Israel shift focus to AI, FinTech and Cybersecurity

A study by strategic consultancy LSP Digital has found that the world-leading high-tech start-up scene of Israel has developed a keen focus on artificial intelligence and machine learning, with the emerging field registering growth of 225% in the past five years and accounting for 13% of all local start-ups.

Hamburg-headquartered LSP Digital, formerly Löwe Schwandt & Partner and a sister of leading global statistics portal Statista, is an analytically-driven strategy consultancy with a focus on digital transformation, operating in the telecommunications, media and publishing, and retail sectors among others. In its latest research insight, the firm has looked into the breakdown of the start-up scene in Israel, finding a shifting focus toward AI and machine learning.

The study notes the vibrancy of Israel’s start-up sector, describing it as the hot-spot of the global high tech community with venture capital of $630 per capita. This correlates with a review of the country’s mergers & acquisition landscape conducted by PwC at the start of the year, which fell in value by 27% in 2017 over the previous year – buttressed only by a booming tech sector which even excluding the mega-deals jumped by 71%.

And according to the LSP Digital research, the Israeli start-up scene has over the past five years delved further into the high end of the tech realm, with a third of all start-ups founded since 2016 operating in the areas of artificial intelligence and machine learning (13%), fintech (10%), and cybersecurity (10%) to record respective growth rates of 225%, 150% and 67% on the three-year figure to 2013. While still only a fraction of the market at a 3% share, the augmented reality (AR) domain was the only other growth area, rising from 1% in 2013.On the flip-side, even relatively high-end technological segments such as big data/analytics, biotechnology and software/cloud all witnessed declines in start-up market share, while advertising/social media and mobile/apps appeared yesterday’s news, recording massive falls in start-up focus since 2013 – with advertising/social media dropping from 14% to 5%, and mobile/apps contracting to 3% from a former 11% share.

As an example of the shift in trends, the study cites Verbit.ai, a high-accuracy automated speech recognition platform driven by AI and designed to transcribe spoken words to text, which raised $11 million in venture capital from a seed round earlier this year after founding in just 2017. Other recent triumphs include OrCam, the wearable AI assistance technology for the visually impaired which pulled in over $30 million in further funding to hit unicorn status with a $1 billion-plus valuation. With respect to AI, the list of unicorns is growing.

As for fintech and cybersecurity, the former is experiencing exponential growth in just about every corner of the globe, including across the Middle East, where consultancies and a number of regional authorities are working together on fintech support measures and accelerators – including Accenture in Dubai, KPMG in Abu Dhabi, Deloitte in Saudi Arabia, and Roland Berger in Bahrain – while in terms of cybersecurity, the LSP report notes that the Israel sector has long been dominant, leveraging the expertise of the cyber unit of Israel Defense Forces.