Why greater Tel Aviv is called the capital of Silicon Wadi – strengths, weaknesses and special features of the tech startup hub

09/25/2017  |  Startups

It`s not a secret anymore, but still very much worth a reminder: the best tech startup hubs are not only found in the U.S. and Europe – there is another bright star shining in the Middle East. Israel is often referred to as the Silicon Wadi (wadi being Hebrew for valley). Why? Just imagine, only China and the U.S. have more firms listed on the NASDAQ than Israel, a comparably very small and young country. This standing is mostly due to the country’s main business city: Tel Aviv (and its 10km surroundings).

With about 2,500 startups in a city of only 435 thousand inhabitants, Tel Aviv has one of the highest startup densities in the world. Knowing this, it`s no surprise that Tel Aviv was ranked number 6 in the 2017 Global Startup Ecosystem Ranking by Startup Genome. Why so many startups are founded or come to Tel Aviv becomes clear by the description of Ami Gal, CEO & Co-founder of CODE_n Alumnus SQream:

“Tel Aviv is one of the most fun cities in the world to live and work in. Luckily for us, it comes with a fantastic eco-system for a global start-up like SQream. Many talented people, active and large funding, a startup community as well as presence of and access to strategic partnerships with international players from all over the world – Europe, US and all the way to the far east.”

Sounds heavenly, doesn’t it? Let’s take a closer look at what it means for entrepreneurs founding a startup in Tel Aviv: the strengths, weaknesses and special features of the tech startup hub Tel Aviv.

What are Tel Aviv’s strengths and benefits as a tech startup hub?

Strength #1: Large funding and M&A eco-system

The Israeli government did an amazing job with many incentives including the Yozma program and the innovation authority to contribute to a very VC-friendly environment that startups can now benefit from. Today, a large number of renowned foreign and domestic venture capital firms, corporate investors, angel groups and strategic players from all over the world are constantly looking for innovative startups to invest into or to acquire.

To name a few – Microsoft, Cisco, IBM, Intel, Google, Amazon, Facebook – all have large facilities, R&D centers, corporate venture arms and M&A activity in Tel Aviv; Lightspeed, Bessemer, Sequoia, Battery, Greylock, Canaan, Accel are only a few of the many of the world class VCs operating in Tel Aviv in addition to the many dozens of the local VCs and investors. Investors from Europe and China are also increasing the activity in Tel Aviv in recent years. $4.8bn were invested in startups in 2016 and 2017 is going to surpass the $5bn mark.

Strength #2: Vast IT-knowledge

The Israeli military system surely is debatable. But it has its perks: the army invests heavily in military research and development. As a result, it trains highly qualified IT-experts, especially in the demanded fields of cyber security, deep technologies and infrastructure. After their military service, these talents are worth a mint for tech startups.

Strength #3: Great people and entrepreneurship culture

Israelis also shine with great soft skills – again partly due to their military service. Before they even enter university or the business world, they develop great skills in teamwork, management and leadership. This way, at a young age they naturally take up responsibilities, are assertive and work autonomously.

What are the weaknesses of Tel Aviv for startup founders?

Weakness #1: Limited market

As mentioned, Tel Aviv is a small city in a small country. Logically, the limited domestic market leads to difficulties in scaling for businesses. The consequent solution is to focus on international growth opportunities – and luckily the startups of Tel Aviv have proven their outreach to international partners.

Weakness #2: Time difference

Forming partnerships with international businesses is easier said than done when you’re dealing with a time difference. Right, that means working without a sensible sleeping pattern – nothing new for a startup founder anyway, is it?

What are Tel Aviv’s special features for startups?

Special feature #1: Strong community

There is something about the startup community in Tel Aviv. You meet entrepreneurs sitting in cafes all day, working, networking, and exchanging important information. The culture is extraordinarily open, communicative and supportive; people gladly share knowledge and help each other. But: If you’re not an Israeli, the access to this unique and vital community might be hard. As usual, the key here is to know the right people.

Special feature #2: Straight-forward people

We already talked about the strong character of Israeli people. It also brings another trait with it: Let’s call it a direct communication style. Expect no sugar-coating. Instead, when talking to entrepreneurs you will find yourself faced with unfiltered opinions and highly sensitive BS radars. But once you’ve got yourself some tough skin, you will surely appreciate it: No losing time and energy by talking around the problem, but straight-forward opinion expression.