(Re)Inventing Israel’s Capital Markets
The historic 2010 dual graduation of Israel to developed country status in the OECD and MSCI country indexes should have opened its markets to a large pool of foreign investors. Instead, there has been a real decrease in foreign portfolio investment and an increase in local portfolio outflows. These conditions put the future of local capital
investment and overall economic growth at risk.
Participants at this Financial Innovations Lab concluded that the time has come to “reinvent” Israel’s capital markets. Israel needs to put the mechanisms in place to finance the expansion of its high-tech companies and disruptive technologies so that they can become self-sustaining. Their success in commercializing technologies and products
for export will strengthen the greater economic security—and will enable Israel to serve as a model for other countries seeking to emulate its rise as the first startup nation.
The lack of late-stage financing, along with human capital constraints, is leading startups to premature exits through mergers and acquisitions. Knowledge-based firms and their exports, the heart of Israel’s competitive advantage, require a longer financial runway for takeoff in transitioning into global companies.
It is time to adopt financial policies that increase liquidity in the capital markets and encourage firms, through regulatory and tax regimes, to pursue more transparent disclosure policies to attract new capital.