Bitcoin and blockchain startups booming in Israel
Israel is a well educated middle-eastern country with a population of only 8.4 Million and GDP of almost US$300 Billion, of which their technology sector accounts for 15.7%. Startups contribute an unusually large portion towards these numbers, and lately, this trend has manifested itself as an unusually rich and constant stream of bitcoin and blockchain companies.
So many well-funded local startups are focused on blockchain business that Deloitte recently created a report focused on the Israeli blockchain business scene. Deloitte’s professional network provides financial advisory services to over 225,400 professionals around the globe, generating US$35.2b in revenue during 2015.
The report illustrates in clear detail that growth of bitcoin and blockchain startups in Israel has been pushing forward faster than anywhere else in the world, outside of silicon valley, at least.
"Israel has the highest concentration of technical companies outside of Silicon Valley and the highest number of NASDAQ-listed technology companies, after the U.S. and China. Also, Israel's technology industry accounts for 15.7% of the country’s GDP."
The paper says that between 150 and 230 businesses in Israel accept Bitcoin, with “almost 50” brick-and-mortar stores accepting it as payment in Tel Aviv. Coinmap currently shows a slightly smaller number, pointing to 64 self-listed merchants that accept bitcoin as payment. These businesses include kindergartens, tattoo parlors, lawyers, a car repair shop, and about 15 bars and restaurants, according to the report.
Two of the four Bitcoin ATM machines in the country are located in the downtown Bitcoin Embassy, a hub for the community and entrepreneurs. Informally referred to as “never ending meetup,” the embassy hosts lectures, offers educational classes about Bitcoin, holds a weekly in-person trading session, and provides a meeting environment for collaborative work on blockchain-related projects.
The venue also hosts the popular Israeli Facebook Group, Israeli Bitcoin, which has more than 4,600 members, making it one of the most popular facebook bitcoin groups by locality.
After some basic background on Bitcoin and blockchains, the Deloitte report explains in detail why Israel has a unique environment suited for bitcoin startups: “The hotspot for disruptive innovation.” Their reasons focus on excellent eduction in the fields of computer science and finance, and also that there are lots of investors interested in the fintech startup space. These investors raised US$269 Million in venture capital for 61 Israeli fintech companies in 2014 alone.
Venture Capitalists have certainly taken notice of both bitcoin and blockchain solutions in Israel. Mariano Belinky, Managing Partner at Santander InnoVentures, the $100 million fintech venture capital fund of Santander Bank, expressed that he sees a strong future in the Israeli blockchain industry, especially in banking: “I see blockchain technology as a good candidate for future secure financial transaction technology.”
“Israel is already a strong player in this area, and definitely has the talent to develop blockchain-based apps for banking.”
- Mariano Belinky, Santander Bank
According to the report, there are 430 Israeli fintech companies, including large enterprises as well as hundreds of local startups. 14 of them have multinational fintech Research and Development centers located in the country. Deloitte also claims that Israel boasts its R&D expenditure is 4.25% of the country’s GDP, “the highest ratio of any country in the world.”
Universities there also play a large part. The report lists four different Israeli universities with blockchain research pioneers on staff, each of which has contributed to the ecosystem by writing a protocol or piece of code that the Bitcoin development community has embraced.
Deloitte lists 38 different Bitcoin and Blockchain startups, many of which are well known through the Bitcoin community, such as the decentralized social networking community Synereo, instant messaging with bitcoin app GetGems, and popular bitcoin mining hardware manufacturer Spondoolies-Tech. Each is listed in one of 8 broad categories and includes a description, links, and founding year.
However, it’s the detailed listing of the eleven selected startups that steals the show. Despite not telling us how the eleven were selected, each is very useful for reference purposes, and there is a detailed mini-dossier that includes facts like company type, number of employees, amount of funding, and a company history.
Although they have more merchants than most small countries, it’s hard to measure exactly how much local citizens embrace bitcoin and blockchain technology in their daily lives. Israel doesn’t have the levels of merchant adoption that Brazil enjoys. And although trade has been steady and somewhat growing at their largest exchange, Bit2C, they haven’t seen a huge jump in volume growth like the Philippines did last year.
Bitcoin is clearly not illegal in Israel, but there have been “high risk” warnings issued to the public.
“The Bank of Israel is [...] examining the need for some sort of regulation regarding electronic, virtual and other similar currencies."
- Yoav Seffer, spokesman for the Israeli Central Bank
Even still, the concentration of bitcoin businesses and specifically startups that are choosing to make Tel Aviv their headquarters is impressive by anyone’s standard. If Silicon Valley is a good example of the road Israel is traveling down, it will continue to grow and become an important destination for Bitcoin and blockchain business and events into the future.