Reason for concern: a new report published today, by the research and policy institute SNPI from Startup Nation Central, found that only 417 startups were opened in Israel in 2021. According to the report, even when you take into account that some of the companies founded in 2021 have not yet been discovered, a pace The average annual decrease between 2017 and 2021 is 11.3%, and the decrease in the last year indicates a worsening of the trend.
The authors of the report explain that there are three reasons that explain the downward trend in the number of new startups. First, technological developments that create a size bias - startups that are opened today are already larger at the stage of their establishment. According to the updated data, it was found that for companies established in 2020-2021, the number of employees The employed one year from the date of their establishment was about 27% higher than the figure for companies founded in 2014. However, it should be noted that the increase in the number of employees is still low compared to the decrease in the number of startups.
Second, large companies operating in Israel (development centers of multinational companies or of local growth companies) compete for the same human capital resources against young startups.
According to the latest data, this competition increases the opportunity cost of entrepreneurship and the cost of establishing a startup, because of the high wages of R&D workers and others. According to the latest data, there is a linear relationship between the increase in wages in high-tech and the decrease in the number of startups.
Third, a comparison between the high-tech centers in Silicon Valley and London shows that the phenomenon of the decrease in the number of new startups is international.
"A continuous decline of four consecutive years at a high rate puts Israeli high-tech at a problematic risk margin," the institute's report reads. "The decline is important for the Israeli economy, because startups are the basis of Israeli high-tech."
Implement a plan as soon as possible
The SNPI Institute believes that the government should prepare and implement as soon as possible a plan to encourage technological entrepreneurship, in part by increasing the budget for support programs for entrepreneurs and startups of the Innovation Authority.
The CEO of SNPI, Uri Gabai: "The erosion of entrepreneurship should worry those for whom the robustness of high-tech is important."
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