There are currently more than 700 tech companies in Israel developing solutions for climate challenges. These include solutions to promote more environmentally friendly agriculture and food processes, circular economy, clean energy, green transportation, sustainable manufacturing, nature protection, and more. Since the beginning of 2022, the Israeli climate-tech sector has seen an impressive series of funding rounds, including mega-rounds and acquisitions with some exceeding $200 million per transaction. According to Start-Up Nation Finder data, in the first half of 2022 the Israeli climate-tech industry raised $1.13 billion in 50 deals, more than double the funds raised in the first half of the previous year. In the last two years, investments in Israeli climate-tech have grown 2.5 times faster than the global investment rate in the sector.
Despite all this good news and these many achievements, Israel is still a long way from being a global leader in the climate-tech sector. Currently, 67% of venture capital investments in Israel are in the fields of fintech, IT, and cybersecurity. This does not leave much capital for companies that are responding to climate change, which mainly develop hardware solutions requiring large investments and involving long and complex development and go-to-market processes.
However, Israel, as a proven leader in developing advanced solutions to global challenges, such as in the fields of water and agriculture, is perfectly poised to play a central role in the fight against climate change. Aside from advanced legislation and government incentives necessary for Israeli startups to test and scale their climate solutions in the local market, at Start-Up Nation Central we see the biggest strategic route to develop the Israeli climate tech ecosystem in activating multinational corporations (MNCs) to engage with the local innovators.
Israel is one of the few countries in the world with such a significant presence of multinational companies operating in its territory. There are over 530 of these centers from 35 different countries, most of them operating in the core areas of the Israeli high-tech sector, like fintech, cyber, and IT in the form of R&D centers, investments in startups, and collaborations with entrepreneurs.
Over the years, much has been said about the contribution of the presence of MNCs to the local innovation ecosystem – from injecting more investments, to training our workforce, to the contributing to the emergence of a generation of entrepreneurs who understand the needs of the international markets better, and can develop technological solutions after being exposed to the challenges of large corporations.
Still, there is one important benefit the presence of these international innovation centers provides that has not been fully explored. This refers to the potential of collaborating with them to make important progress in coping with the climate crisis and advancing the Israeli climate-tech sector. How can this be done?
The secret lies in the fact that about a third of the largest corporations in the world are already committed to decarbonization climate targets– an increase of about 20% compared to last year. Whether the corporations are operating this way due to mandatory regulations or for image-related purposes, they have obligations to fulfill and are hungry for technological solutions that will help them meet their goals.
As part of Start-Up Nation Central’s work to advance the climate-tech sector, some of these MNCs are already approaching us in their search for Israeli start-ups of a different kind. These multinationals are looking for alternative solutions to plastic packaging, energy efficiency, wastewater solutions, cleaner manufacturing processes, carbon capture and more. This is just the beginning of a trend that we expect will send a strong signal to Israeli entrepreneurs.
If these hundreds of companies, all of which have environmental obligations in their home-countries, develop a dialogue with the Israeli tech industry with a climate focus, then a real opportunity for mutual profit and growth will be created. Such a connection would send a strong signal to local entrepreneurs that there is a demand for climate solutions and a real opportunity in the market.
To accelerate this ripple effect, over the past year, Start-Up Nation Central has joined forces with leading multinational companies, such as SolarEdge, Merck, Seagate, Capital Nature, the Temasek Foundation, ESIL, Kornit Digital, Mitsui Sumitomo Insurance, and many others, to promote the “Climate Solutions Festival” that will take place this week on Wednesday. Activating MNCs to explore the Israeli ecosystem from the climate perspective may have the single strongest effect to encourage more of our entrepreneurs and more of our VC community to choose climate tech.
More than so, it is an important leap forward in promoting investments to support the next generation of Israeli innovation.
Yael Weisz Zilberman is the Head of Climate-Tech at Start-Up Nation Central
