Innovation Authority Executive Warns Israel’s Startup Brand Is Eroding

Karem Nebo, the Innovation Authority’s vice president for growth, spoke at Globes’ TECH IL conference about the opportunities and sharp challenges facing Israeli high-tech, from the dollar exchange rate to the country’s startup-nation branding. She said the authority invests about 2 billion shekels a year in startups and growth companies, making it one of Israel’s largest funding bodies, and that it also works on policy issues such as taxation, regulation and human capital to improve the business environment.

Nebo said the past year was likely one of the best ever for Israeli high-tech, with a record year in exits even without major deals like Wiz and CyberArk. At the same time, she said, there is a structural stagnation, including a 6.5% drop in R&D workers and a decline in the number of new startups being founded in Israel. High-tech output is rising, she added, but has still not reached expectations, and the funding mix is shifting toward investors backing companies that have already shown growth rather than early-stage startups.

According to Nebo, three forces are reshaping market conditions, exchange rates, geopolitics and artificial intelligence, while many Israeli talents are leaving abroad, creating what she called a “perfect storm.” She stressed that the Innovation Authority serves as a bridge between government and high-tech, and raised the question, “What is the advantage of being an Israeli company?”

In her view, the startup-nation brand has been damaged, trust in Israel as a stable long-term base has weakened, and companies must ask whether it is economically worthwhile to stay concentrated in Israel or diversify risk. Nebo said the positive scenario would involve stronger public-private cooperation, anchoring companies in Israel and restoring the brand, while the negative one would see Israeli identity weaken and high-tech flow out. She called for a new dialogue with government to rebuild trust, stabilize regulation and taxation, and use state support, including grants after October 7, investment in institutional investors or Israeli venture funds, tax incentives and reforms.