Israel’s Machine Intelligence Startup Landscape 2017

In the past few weeks, VC Cafe covered 30 promising Machine Intelligence startups in Israel, emerging clusters for Machine Intelligence around the world and the speed at which they are getting funded and acquired. Today, guest author Daniel Singer presents a comprehensive AI landscape covering 437 Israeli startups operating in the space of artificial intelligence, machine learning, deep learning, computer vision and robotics. Of the 437 startups, 300 are funded and active and to date, Israeli startups raised a combined $3.2 billion. There have been a few exits in the space as well, over 50 startups exited, reaching a tune $1 billion in returns.

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The artificial intelligence industry is expected to be worth $59.8 billion by 2025, and the term AI has become ubiquitous worldwide; the frenzy of many tech enthusiasts, or the topic of discussion at a dinner table. But the hype actually lives up to its name. AI startups are flush with VC cash and even key corporate leaders are actively utilizing the technology to add value and gain a competitive edge.

Feared and praised by the world – tech mogul Elon Musk believes AI will be a catalyst for the next world war, and AI guru Andrew Ng compared AI to electricity’s transformative role in economic development – it is expected to fuel a technology revolution. And Israel, not surprisingly, is well placed among the world leaders to be a driving engine.

In an effort to track the state of AI in Israel, I researched and analyzed Israeli startups that are employing artificial intelligence technology. The infographic above maps over 430 Israeli startups using AI technology as a core part of their offering, ranging from early to late-stages of funded companies. The startups are separated into eight categories: Technologies, Sectors, Industrial, Automotive, Enterprise, Healthcare, Fintech, and Marketing, and the technology is being used for a myriad of purposes.

Insights

In the following post, I’ll dive deeper into analytics on Israel’s AI startup ecosystem. For now, here’s a top 10 summary of my findings:

  1. Funding for Israeli AI startups is heating up. For the 2017 year-to-date, Israeli AI startups have raised $837 million, which is already larger than the total period for 2016, and represents a fifteen-fold increase in the last five years.
  2. The number of startups using AI technology has nearly tripled in size since 2014, and based on a three year average growth rate, 95 new AI startups are founded each year in Israel. Almost 300 startups were founded between 2014 and today, representing over 60% of all Israeli AI startups.
  3. Most of the new AI startups founded since 2014 are in the Marketing and Enterprise sectors. The Enterprise AI market is valued at $31 billion and growing by 64% annually. By 2020, more than 40% of new IT expenditures are expected to go toward AI solutions. Last year, a survey found that 38% of enterprises are already using AI, growing to 62% by 2018.
  4. The majority of startups are business-facing – 85% are classified as B2B, while 15% are B2C.
  5. Among the AI technology utilized, 57% use machine learning techniques, 15% use deep learning techniques, 7% use natural language processing, 4% use computer vision.
  6. The top 10 most active investors to date in the Israeli AI space are: Microsoft Accelerator, Office of the Chief Scientist of Israel, JVP, Nielsen Innovate, OurCrowd, Magma Venture Partners, UpWest Labs, Aleph, Glilot Capital Partners and Horizons Ventures.
  7. More than half of the active startups have raised $500 thousand or less in total funding, and the average age is 2.8 years since founding.
  8. The Marketing, Enterprise, Healthcare and Fintech sectors have the largest concentration of growth/later stage startups. Fraud and Insurance focused startups dominate the Fintech sector, representing a combined 63% of the total Fintech sector.  For growth stage startups, the Enterprise sector has received the majority of funding ($760 million), represented mostly by cyber security startups.
  9. There has already been $1.0 billion in total exits, and the average exit deal size is $72 million. Based on the available data, Israeli AI startups are exiting at an average multiple of 8.2 times their total funding, ranging from a low of 2.0 to a high of 20.0 times. The time lag from founding to exit takes 5.4 years on average.
  10. Half of the exits occurred in the last two years, and half of the exits were Marketing related startups. Corporate giants like Apple, Microsoft and Google are actively competing to gobble up AI startups and attract the best talent.

The Israeli Machine Intelligence (AI, Machine Learning, Computer vision, NLP, and Robotics) startup landscape 2017

Machine Intelligence startup landscape in Israel, September 2017 (Click to enlarge, high resolution) – updated Sep 27, 2017

The most active sectors by funding are: Cyber Security for Enterprises ($575M), Image and Video Recognition Technologies ($211M), Insurance & Fraud in Fintech ($189M), Support Technology for Enterprise ($184M), Content for Marketing ($165M), and Internal Data and Intel for Enterprise ($132M). Startups providing Advanced Targeting services, however, are largely concentrated within the Marketing sector, comprised of many seed and pre-seed or bootstrapped funded companies. Additionally, the Personally Identifiable Information and Data Leakage are the focus of many market entrants of Enterprise Security.

Through a deeper lens, the most funded subsectors are:

  • Enterprise Cyber Security: incident response, detection, prevention and cyber intelligence
  • Image and Video Recognition: contextual image recognition platforms and visual recognition engines for retail and security verticals.
  • Insurance and Fraud: e-commerce fraud prevention, merchant risk management and insurance carriers.

The AI space in Israel is certainly growing and even leading the way in some fields of learning technologies. Stay tuned for a deeper dive into each sector as well as profiles on notable startups in the following posts.

Feel free to download and share the infographic as you please. To purchase the excel file with the list of Israeli startups using AI technology and their corresponding details, send me an email.

I may have missed some companies who might be too young or under the radar. If you notice any missing companies, please email me.

Note: The process of categorization was based on opinion at times and may have errors. The list is not exhaustive.

Daniel Singer

Daniel Singer

Passionate about unique businesses solving complex problems. B.A. in Finance from John Molson School of Business, Concordia University. PE & VC Analyst, Canada and Israel.
Daniel Singer

Latest posts by Daniel Singer (see all)

Daniel Singer

Passionate about unique businesses solving complex problems. B.A. in Finance from John Molson School of Business, Concordia University. PE & VC Analyst, Canada and Israel.

2 Comments

  1. AI is a capability that can be embed in many solutions as like search today embed in many products. That didn’t turn all the companies that embed search in their product to be a search company. Calling any company that use some kind of statistics an AI company does not help the domain and just creating a bigger hype. There are companies in this graph that I’m know and are very far from “Artificial Intelligence”. I really think that you need different type of definition to decide what is AI company.

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