Israel’s tech industry needs ultra-orthodox to grow

PETA KROST MAUNDER

“We have to tap into these talent pools to ensure that the tech industry doesn’t begin to contract,” says Amir Mizroch, the Tel Aviv-based director of communications for Israeli tech organisation Start-Up Nation Central.

Bringing in new talent “is a race against time” because “Israel’s economic strength and national resilience relies on a strong Israeli tech industry”, says this Israeli who grew up in South Africa and studied journalism at Rhodes University before returning to Israel.

“The number one problem in Israel’s innovation ecosystem is that only about 8% to 9% of the Israeli workforce work is in it. The other 91% work in the traditional, low-tech economy, says Mizroch, whose organisation tracks about 6 000 innovation companies across a range of sectors and stages of growth.

“While 9% is probably the highest percentage in the world – and that’s great – that number hasn’t grown in a decade. In the meantime, the demand for Israeli tech is growing so fast, the demand isn’t being met by enough skilled workers. Not even close.”

In a recent report, Start-Up Nation Central and The Israel Innovation Authority calculated that the tech industry is short of about 15 000 people. This means, Mizroch says, that there are about 15 000 jobs that aren’t being filled because the candidates just don’t exist.”

“While 9% and 15 000 jobs might not seem big numbers to you, consider that the tech industry accounts for about 12% of Israel’s GDP and about half of its exports. Tech is the driver of the Israeli economy as a whole.”

Mizroch says that “unless Israel gets more Israelis into the tech workforce, someday soon our tech industry will no longer be able to deliver on its potential, and it will begin to contract. That day isn’t here yet, but we are seeing the talent crunch starting to have a material effect.”

He believes the best way to address this is to tap into previously untapped talent pools in Israel – that of the haredim, Arabs, people from periphery regions, and many, many more women.

There are some good projects in place to make Israeli tech more inclusive, and these are unbelievably important now, Mizroch says.

The companies Start-Up Nation Central tracks exist across a range of sectors and growth phases. These include some well-established sectors in Israel like cyber and fintech (about 500 start-ups each), and some maturing sectors like digital health (500), agri-food tech (400), and smart manufacturing (200). There are also emerging companies in artificial intelligence, robotics, blockchain, and quantum technology.

Israel’s start-up scene is diverse, says Mizroch, with people from one discipline doing things in many others. An example of this is military surveillance technologies being used to monitor crops in agriculture.

Mizroch explains how the hi-tech industry blossomed in Israel, and why it now stands at the precipice.

“In the 1990s, there was a wave of immigration from the former Soviet Union – about a million people. Many of them were engineers and scientists, and over time, they formed a very strategic human-capital pillar of Israel’s hi-tech industry. This was in every area, from semiconductors to materials science.

“Sadly, many of these people are now retiring, and we haven’t found a way for them to feed back into the ecosystem and mentor the younger generation. This will be a big loss for Israeli tech.”

Mizroch says these retiring engineers should be mentoring young up-and-coming engineers to ensure the continuity of skills.

As the start-ups mature and succeed, they move into global markets and often partner with or are bought out by global companies. This, says Mizroch, is fantastic for Israel as long as there is a balance in the ecosystem. This means there also needs to be an increase in the number of companies growing within Israel and staying independent.

Israeli companies in their growth stage – like WIX, Fiverr, OrCam, Moovit, Payoneer and many others – can attract good talent and hire non-technical employees in marketing, human resources and operations. “This is important so we can bring more Israelis into the tech workforce,” he says. “It also means they create more jobs here, more opportunities, and they pay more local taxes, which benefits all Israelis.

“If too many start-ups are sold to international companies, they become ‘just’ the local research and development centres of multinational corporations. In this case, the local teams tend to remain small, very few non-technical employees are hired, and much of the IP (intellectual property) moves abroad.

“This means less Israeli companies are growing and staying independent in Israel. The ecosystem depends on a balance between the ability to churn out new start-ups, a good environment for those companies to grow in Israel, and the growing presence of multinational corporations in Israel’s innovation ecosystem.

“When too many start-ups are bought up by multinationals at a very early stage, or when multinationals greatly expand their local talent pools independently, they usually end up driving up salaries to attract the best talent. Young start-ups and maturing Israeli tech companies can’t compete with the salaries of the likes of Amazon and Google. So, it becomes increasingly hard for ecosystems to grow.

“One in four Israeli tech companies at the growth stage are already off-shoring development work [to places like Kiev]. That’s good on the one hand [these companies continue growing], and not so good on the other [there’s a weaker connection to the Israeli ecosystem],” he says.

Mizroch believes in the country’s ability to change the downward movement to a upward swing. “There has been a turnaround in the amount of mathematics taught to school kids, and more people are graduating in computer science than ever before.

“The universities all have their tech-transfer offices going well, and there is exciting stuff coming down the pipeline in everything from robotics and materials science to fraud detection and artificial intelligence.”

He is adamant that ultra-Orthodox women and Arab Israelis need to come on board to improve the situation. “Israel’s tech industry leaders – the government, companies, and institutions – need to work together with the leadership of the ultra-Orthodox and Arab Israeli communities to strike a balance between observance and the modern workplace. This will make it all possible.”