Israel’s startup paradox: More companies, fewer survivors
New CBS data show that for every two startups founded since 2011, more than one has shut down, highlighting the sector’s growing maturity and rising risk.
Between 2011 and 2024, 10,157 startup companies opened in Israel, while 5,740 of them closed. This figure, opening the Central Bureau of Statistics report published this week, encapsulates the story of the Israeli innovation industry over the last decade and a half: high dynamism and an impressive rate of company openings, alongside high mortality rates for ventures - about 57% of companies opened during this period ceased to operate or suspended their activity by 2024. These data indicate that for every two companies that open, more than one closes, a fact that emphasizes the high level of risk inherent to the sector.
The report, which surveys the activity of startup companies and mature companies in Israel, presents a complex situation report as of 2024. Alongside a recovery in capital raising and an increase in wages, there is a decrease in the number of employed persons in young companies and a clear demographic trend shift in the balance of companies. The 2024 data presents an industry in a process of maturation. Alongside a high rate of young company closures and difficulty in initial capital raising, the establishment of mature companies and the recovery in capital raising for established companies are evident. The rise in wages alongside the decrease in the number of employed persons in young companies may indicate efficiency, while the gaps between different fields - the growth of cyber and defense versus the decline of content and media - reflect the changing priorities of the market.
According to initial estimates, 4,493 active startup companies operated in Israel in 2024. From a multi-year perspective, this represents an average annual increase of 2% since 2011. However, an analysis of trends over the timeline reveals a fundamental shift that occurred in the middle of the previous decade. While an average annual increase of 4% was recorded in the balance of startup companies between 2011 and 2015, starting from 2016, the trend reversed, and decreases were recorded in the company balance. This means that in recent years, the rate of company closures and activity suspension has begun to exceed or equal the opening rate.
One of the prominent trends in the report is the reduction in manpower within young companies. In 2024, approximately 32,400 employee jobs were employed in startup companies, a figure reflecting a sharp decrease of 13% compared to 2023. These jobs constitute only about 8% of total employee jobs in high-tech.
Conversely, those remaining employed in these companies benefit from a wage increase. The average monthly wage per employee job in startup companies stood at NIS 27,200 in 2024, an increase of 4% compared to the previous year (NIS 26,200). For comparison, this wage is 2.1 times higher than the average monthly wage per employee job in the general economy, which stood at NIS 13,200. However, it is interesting to note that the wage in startup companies is still about 15% lower than the general average wage per employee job in the high-tech sector, which stands at NIS 31,900.
The report makes a clear distinction between "startup companies" and "mature companies" - former startup companies that have finished the development stage of a product, service, or process and started the manufacturing process. As of 2024, 3,027 active mature companies operated in Israel. Although they constitute only about 40% of total active companies, their importance to the labor market is crucial: these companies employ approximately 126,900 employee jobs, constituting about 80% of the total employee jobs common to startup companies and mature companies together.
Within the group of mature companies, concentration is also evident: 33% of the mature companies (those employing more than 25 employee jobs) are responsible for about 90% of the total employee jobs in this category.
An analysis of fields of activity reveals significant gaps in the survival and growth chances of different sectors. The report uses a "vector of change" model to identify fields in growth versus fields in decline.
The field of content and media was marked as a field in distinct decline; in 2024, the percentage of company closures in this field (21%) was significantly higher than the percentage of openings (8%). In contrast, the fields of defense and cyber demonstrate resilience. In the defense field, a positive ratio of 23% openings versus 14% closures was recorded. Moreover, the defense field presents the most promising maturation horizon: 35% of companies opened in this field eventually became mature companies, the highest rate among all fields.
Regarding wages, employees in advanced hardware and software fields lead the table. The highest average wage was recorded in the semiconductors field (NIS 34,200) and the cyber field (NIS 33,000). The largest sector in terms of job volume is "Applications for Industries and Businesses," employing 7,000 employee jobs, which constitute 22% of total employee jobs in startup companies.
After 2023 was characterized by crisis and a decrease of 51% in capital raising, 2024 marked a return to a growth trend. Total capital raising by startup companies and mature companies amounted to roughly $11.8 billion, an increase of 18% compared to $9.9 billion in the previous year.
However, a breakdown of raising rounds indicates a shift. While capital raising in intermediate stages (A & B rounds) recorded an impressive leap of 70%, raising in the most initial stages (pre-Seed & Seed) dropped by 25%. This figure indicates a growing difficulty for new entrepreneurs to raise initial capital to drive ventures, while companies that have already proven feasibility enjoy increasing support.
In terms of fund distribution, while the majority of companies (51%) raise in early rounds (Pre-Seed & Seed), the largest financial share (49% of the total amount) flows to Late Rounds. An exception is the defense field, where 73% of raising amounts were concentrated in A & B rounds.
The Innovation Authority continues to play a central role, especially in fields requiring deep R&D. In the years 2022-2024, about 21% of startup companies received grants for R&D totaling NIS 2.1 billion. Dependence on government funding varies dramatically between fields: in the Semiconductors field, about 47% of companies benefited from grants, and in the life sciences field, the rate stood at 33%. In contrast, the cyber field is characterized by a high "leverage ratio," indicating the dominance of private funding with relatively low government involvement.
The report reaffirms the geographic concentration of the sector. 74% of startup companies and 80% of employee jobs are concentrated in the Tel Aviv and Central districts. This gap is also reflected in wages: the average wage in startup companies in the Tel Aviv district stands at NIS 29,800, 1.4 times higher than the wage in the Southern district, where it stands at only NIS 21,200.
