Over 100 Israeli start-ups have closed over the past 18 months, while 50 defined themselves as “frozen”. The figures were published in a survey by Israeli company Koldoon, which provides Israeli and global high tech information services.
Koldoon also revealed that there are only 1,300 start-ups in Israel, not several thousand, as estimate by various industry sources. The findings indicate a relatively low failure rate – less than 10%, which is low in comparison with overseas start-ups.
A significant proportion of the companies closed (25%) were incubator projects supported by funds from the Chief Scientist. These companies did not succeed in obtaining initial financing for leaving the incubator and were closed. Only 15% of all companies closed received support from venture capital funds, indicating that professional investors apparently make more successful investments, although the funds may also continue supporting failing companies to a greater degree than private investors (“angels”) or incubators.
Most companies that closed were relatively old ones, some even founded at the beginning of the 1990s. The “frozen” companies were defined as such by the companies’ own public relations person.
About 40% of the frozen companies and 50% of the closed companies said they had reached the “product ready for sale” stage. Koldoon concludes that the main reason why Israeli start-ups are liable to fail is poor marketing.
Published by Israel's Business Arena on October 22, 2000