A “Globes” survey shows that half of the business product growth in the third quarter came from a surge in sales of high tech start-ups, including sales to foreign investors.
Central Bureau of Statistics (CBS) data reaching “Globes” today indicate that business product grew by an annualized rate of only 6-7%, excluding the high tech sector, compared with an increase of 12.5% including start-up sales.
The figures show that investments in venture capital funds financing start-ups reached a peak of $1.34 billion in the third quarter, compared with only $600 million in the second quarter, a rise of 220%. Most of the growth was in software and R&D companies, particularly in Internet and communications.
It appears that the rapid growth is at present focused in a narrow sector of the new economy, reflecting mostly achievements posted before the outbreak of security disturbances.
Assessments are that the security situation will not affect start-ups in the short-term. In the long-term the damage will also be smaller, even if sales slow down because of the drop in Nasdaq share prices.
The data also indicate that the growth surge does not point to a growth in current economic activity and employment, or a fall in unemployment. In other words, the sharp increase in business product has not brought about a fall in unemployment rates.
Published by Israel's Business Arena on November 15, 2000