2019 was not a great year for many in the blockchain space. Yet, despite widespread employee downsizing and some projects falling by the wayside, blockchain in Israel is thriving. The number of companies in the crypto and blockchain fields grew by 32% in 2019.
Blockchain in Israel booming despite market conditions
According to a report by the Israeli Bitcoin Association published in local financial site Globes, in December 2019 there were 150 active blockchain and cryptocurrency-related companies in Israel. This represents an increase of 32% from the 113 registered at the end of 2018.
Of course, this percentage growth rate doesn’t reveal the entire picture. Not every company operating in blockchain in Israel has found success. The survey found that out of the 113 blockchain companies registered at the end of 2018, just 63 of them continued to operate.
So, almost half of all blockchain companies in Israel folded throughout 2019? It’s possible. However, according to the Israeli Bitcoin Association, it could also be that they changed the nature of their operations from blockchain to fintech or software development, for example.
Moreover, while a 32% increase is certainly a positive for the industry after another difficult year, the number pales into significance compared to the previous year. At the end of 2018, the increase of companies in blockchain in Israel was 113% from the previous year with just 53 in Dec 2017.
Further, while blockchain is steadily growing in this land, it remains a mere drop in the ocean compared to the tech industry at large. A recent report by PwC on the health of the tech sector in Israel found that the number of unicorns (private ventures with a valuation of more than $1bn) rose from 11 to 20 in 2019, with the value of exits doubling from the previous year.
More companies but smaller and more niche
The report on blockchain in Israel further found that companies in this area tend to be small, employing fewer than 10 members of staff. This would appear to be a significant drop from previous years.
According to the Israeli Bitcoin Association, 65% of companies said that they employed up to 10 employees. 31% had between 11 and 50 employees on their books, while just four companies (fewer than 3%) employed between 50 and 200 people.
Funding was also significantly reduced in 2019 compared to the last two years. This is unsurprising given that Israeli companies received some of the most capital in the 2017 ICO frenzy – and at least $600m in 2018 alone.
Raising capital has become harder for businesses all around the world in this space and the situation is no different in Israel. Sources of financing in 2019 included some seed funding (around 34% of companies), round A funding (just 1%), and round B funding (6%). The majority of businesses working in blockchain in Israel are self-funded.
While companies are somewhat geographically dispersed, the majority are located in Tel Aviv, Israel’s business hub. Of the 150 companies, 91 are located here, with others in Jerusalem, Netanya, Herzliya, and a few other towns and cities.
When it comes to the level of maturity, most of the companies remain very much in start-up mode. Half have released some kind of MVP (Minimum Viable Product) with some 19% in the beta stage. A quarter are still in the research and development stage.
Wrapping it up
Blockchain in Israel may be dwarfed by the wider tech industry here. Companies are small, struggle to raise capital, and many have had to pivot to survive. However, despite the challenging market conditions, the blockchain scene here continues to grow.
With 32% more companies working in the space, no matter their size, we can expect some interesting developments to come out of Isreal this year.