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The Thriving AI Landscape In Israel And What It Means For Global AI Competition

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This article is more than 5 years old.

Daniel Singer

China is beating the US in AI and Europe’s AI experts are challenging both US and China, but a new contender for AI leadership is rapidly emerging. The startup nation of Israel is targeting today’s hottest tech sector by deploying its expertise in cutting-edge data analysis, software and hardware engineering talent, and proven entrepreneurial skills.

According to analyst Daniel Singer, Israeli AI startups (using technologies such as machine learning, deep learning, computer vision, natural language processing, robotics, and speech recognition) have raised close to $2 billion in 2017, an increase of 70% over 2016, and have already raised $1.5 billion this year. An average of 140 startups have been created annually over the last 5 years and there are now over 950 active Israeli startups utilizing or developing AI technologies. (See here for an interactive version of the infographic above).

It’s good to be a member of this exclusive club. Over the last five years, AI startup exits averaged $121 million per deal, selling for 5.6 times their total funding at the date of exit. This multiple has climbed to 8.3 times so far this year. And there are notable success stories—of which VC dreams are made of—such as Intel’s $15.3 billion acquisition of Mobileye and Salesforce’s more than $800 million acquisition of Datorama.

“What makes AI really hot now, is that there are hundreds of new markets and use cases that have recently been opened for disruption due to the advances in AI and data science,” says Shuly Galili, cofounding partner at UpWest Labs. “Most Israeli entrepreneurs have strong military background which means that on average they have more hands-on experience working with AI, image processing, data science, etc. than entrepreneurs from other countries.”

Adds Sian Goldofsky, Senior Analyst at OurCrowd, a leading equity crowdfunding platform investing in startups worldwide: “Access to AI talent is huge in Israel, especially in applications of image recognition and natural language processing but also in other AI-related applications.”

According to Singer, OurCrowd is the most active investor in AI startups in Israel with 26 initial investments and its portfolio includes Cognitiv, an early-stage fund focused on AI. OurCrowd’s 21 exits to date include BriefCam (video content analysis using machine learning), Argus Cyber Security (protecting connected vehicles with AI technologies), and Nanorep (virtual chatbots).

Singer’s analysis has found that 71% of Israeli AI startups are focused on business-to-business applications. The Israeli experience in the enterprise space and in addressing infrastructure- and heavy-industry-related challenges may provide another competitive differentiation. Says Shuly Galili: “Because of their unique experience, Israeli entrepreneurs are completely unfazed by taking their AI chops and breaking into ‘hard’ industries like oil and gas, mining, manufacturing, and agriculture. These industries stand to more dramatically reap the benefits of AI because in each one of them, the data that has been previously siloed away, is now made actionable thanks to AI and data science.”

These insights have guided UpWest Labs’ investments. “We've made it our mission to invest in startups tackling unsexy problems with really sexy technology,” says Galili. “Companies like Waycare, which uses AI to predict traffic accidents in cities, or Airobotics which uses AI to process aerial data at massive mining facilities and oil refineries. Israeli AI startups are interested in working to solve major industrial challenges.”

The proven success and exciting potential embedded in the Israeli AI landscape have attracted leading industrial, consumer, and tech companies that have established major R&D centers in Israel in recent years. This has resulted in increased competition for the close to 4,000 AI developers, engineers, and data scientists working in Israel today, according to Singer, and average annual salaries ranging from $109,000 to $140,000. “There is a shortage of developers and AI specialists in Israel due to the massive amount of startups formed and enterprise R&D presence,” says OurCrowd’s Goldofsky.

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