A study published Thursday by Israel's Start-Up Nation Policy Institute found that there has been an average annual decline of 11.3 percent in new startups founded starting in 2017, a problem that "can no longer be disregarded."
According to the SNPI, the government must act to increase entrepreneurial activities, as only 417 new startups were founded in Israel in 2021.
Several hypotheses were examined to explain the decline. One is that the technological developments of the last few years have made new startups more expansive in their early stages.
The report notes companies established in 2020-2021 have hired 27 percent more employees compared to those established in 2014 a year on.
"However," the report continues, "the increase in the total amount of high-tech employees is still lower than the decline in the number of startups."
The SNPI also notes competition for resources with large companies turns high workers' salaries into a barrier to entry into the market for many fledgling companies.
Other reasons listed are the rising quality of startups and a shift in investor preferences. The report notes, however, that "current figures demonstrate that there was no significant or methodical difference in the quality of startups based on their inception year, based on a specific quality measurement method."
SNPI further says it believes the government must prepare and promptly implement programs to encourage tech entrepreneurship, including more Innovation Authority support budgets assigned for entrepreneurs and startups.
The SNPI also calls for the Innovation Authority to raise the budget ceiling for tech employees in high-tech companies - which is currently at roughly $10,000 a month - to reflect the increase in startup salary costs.
“Startups are the core of Israeli high tech," said SNPI Director Uri Gabai. "The erosion of entrepreneurship in Israel should concern those who treasure high-tech robustness. The new figures demonstrate that, even in 2021, a record-breaking year for investments in Israeli high-tech, the decline has continued and even worsened.
We at SNPI believe that these figures call for active and smart action by the government to encourage the entrepreneurship that positioned Israel as the Startup Nation.”