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Silicon Wadi. It is easy to dismiss any aspiring technology hub using the word “Silicon” in its name as a mere “wannabe” of California’s Silicon Valley. Indeed, the word “Wadi” means “valley” in Hebrew.

But the coastline of Israel has become one of the world’s most significant tech hubs, home to Bay Area firms, as well as hundreds of local companies and a thriving venture capital industry.

In 2018, US$6.47 billion was raised, 17 percent more than 2017 and more than double that of 2013.

But what is it that makes Israel one of the world’s best environments for tech companies?

 

Many observers put it down to its resilience in the face of its diplomatic tensions. Others suggest it is because Israel lacks natural resources abundant in other countries, while others even say that its compulsory military service is a key factor behind the teamwork and leadership skills, as well as the technology.

Israel’s low 23 percent corporate tax rate is another incentive. Since there are so many startups in Israel, the government is forced to make sure growth isn’t stifled by regulation.

Israel’s technology obsession has ranged from mobile apps to fintech, and indeed a significant amount of defence technologies have been born from Israel. The region also hasn’t been slow to adopt blockchain technologies.

Security Matters (ASX:SMX) is one Israeli start-up that has listed on the ASX. Security Matters aims to prevent counterfeit goods by marking (invisibly and irrevocably) any product with a chemical-based barcode.

The details are then stored in the blockchain, and in the future when it is read, the products details match the barcode and blockchain.

Israel has more than 200 blockchain startups, many of which have opted to raise money through an ICO (initial coin offering). Security Matters chose to go down the route of traditional equity financing with a public offering instead of initial coin offerings (ICOs).

In the case of Security Matters, it seems to help that they have a clear plan that is achievable and simple to understand. Being in one of the world’s best environments for technology is no doubt a bonus.

But why list in Australia?

 

There are 18 Israeli companies on the ASX including Security Matters. Many Israeli tech companies have come to the ASX, one of the main reasons being that the Australian environment is ideal for innovative technology companies seeking funding. It is also more than 10 times the size of Israel’s stock exchange, boasts more publicity and greater diplomacy (meaning a less volatile market).

When Security Matters listed on the ASX, CEO Haggai Alon said: “The ASX has given us a house and we are intending on making the Australian market our home.”

If Australia maintains its fund-abundant stable equity market environment, there may be many more Israeli companies to come to Australia.

 

Star Investing has a commercial partnership with some companies mentioned in this article. This content does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.