Tech riding high – an article from Hamodia

Israel’s reputation as the ‘Start-Up Nation’ is valid and well-deserved, even if over-hyped and consequently a source of misunderstanding and confusion. Many economists, business people and even just plain folks around the world, have the impression that Israel is full of kids who wake up every other day with brilliant ideas and then found companies that turn the ideas into reality and riches.

Somehow this starry-eyed view of Israel co-exists in the global media with a very different one, of the oppressive and vicious ‘Zionist entity’ that invades, subjugates and massacres its neighbors. The latter perspective dominates the news and opinion pages, whereas the former is confined to the business and technology pages, so that they rarely actually confront each other.

In Israel, too, the seemingly endless flow of stories about entrepreneurs creating products or apps and then selling their companies to multinational corporations for huge sums, co-exist with a very different stream of stories. These are about hardship, poverty, welfare projects and chessed institutions struggling to survive in an environment of rising needs but declining budgetary support.

The overseas views, both the ‘Israelis are murderers’ and the ‘Israelis are geniuses’ ones, are mythical. I would argue that, different as they are, both of them have anti-Semitic roots – even the supposedly positive one. But the domestic stories, whether of wealth or poverty, are both essentially true, even if the details tend to be exaggerated. They represent just one more facet of a country, a society and an economy full of seemingly impossible contrasts and apparent contradictions.

Thus, alongside the slew of recent reports about poverty in Israel, each one seeking to paint an even more dire picture than the previous one, there are also the summaries of activity in the high-tech sector. These show that in almost every respect, 2014 was a banner year, the best at least since the global crisis of 2008.

Internet and, more specifically, social media applications, have been the ‘hot’ area in recent years – and Israel is a major player there. But it is useful to try and get beyond the global fame of individual apps – think Waze – to see the wider picture of the Israeli industry.

A year-end review from Ethosia, an Israeli human resources company specializing in the technology sector, gathered data from 185 companies of all shapes, sizes and fields of activity. Its findings confirm that the high-tech sector comprises, for most practical purposes, a distinct and separate sub-economy.

Here wages rise almost every year, at rates that other sectors can only dream of. “Average wages rose by at least 3% in every job category”, the report notes, while wages for the roles most in demand – software developers for mobile and internet – climbed 6%-7.5% last year.

This reflects both rising demand and insufficient supply, features that lead employees to quit their current jobs as soon as they see or hear about something better – whether higher paying or more professionally challenging. The percentage of employees voluntarily quitting hit a new record in 2014, at an amazing level of 9.8%, while firings dropped to only 2.5%. Nor is there any need to feel bad for employers, because the average timespan needed to fill a vacant post was down to 4.5 weeks, suggesting that candidates were plentiful and bosses did not need to think hard as to their suitability.

Investment money poured into high-tech, especially start-ups, from all directions. Domestically, ‘angels’ and incubators, along with private equity funds, have largely replaced the traditional reliance on venture capital funds. Overseas financing is even more plentiful, while exit channels are available again via Nasdaq and other foreign stock exchanges, as well as the local Tel Aviv market – all this in addition to outright sales to major companies or investment funds.

Not surprisingly, after an outstanding year, the atmosphere is upbeat and optimistic, with expectations high for 2015 to be even better. However, the volatile history of high-tech, both globally and in Israel, illustrates that a sharp plunge and shake-out always follows a period of boom and excess. The historical record also shows that those who survive the shake-out emerge from it much stronger than they went in.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.