Google’s $1.03 billion purchase of Israeli navigation software maker Waze marks an important milestone for the country that calls itself “Start-up Nation.”
The acquisition is not only among the largest-ever purchase prices for an Israeli start-up. It also cements a recent push by the local high-tech industry into the fast-growing consumer market.
“I think it’s a big step forward,” said Erel Margalit, a leading Israeli entrepreneur and opposition lawmaker in the Knesset. “Israel is no longer just a R&D center. It’s a creative hub.”
Waze’s application combines GPS navigation software with input from users, allowing themto improve the service’s directions and traffic reports with their own data. This aspect enables the service to adapt to changing road conditions, such as accidents and speed traps.
Israeli Prime Minister Binyamin Netanyahu phoned Waze CEO Noam Bardin to congratulate him. “You reached the destination,” Netanyahu said. “You have again put Israeli technology on the world stage.”
According to the Central Bureau for Statistics, Israel’s official source of economic data, the tech sector accounts for just over a quarter of the country’s exports. The bureau uses an internationally recognized definition of high-tech that excludes biotechnology and internet companies. When those are included, technology firms account for roughly half of Israel’s exports, a key reason that Israel’s standard of living is now on par with, and in some cases above, many European nations.
The Waze buyout is among the largest private company sales in Israeli history. In 2000, at the height of the high-tech bubble, Israeli start-up Chromatis Networks was bought out by Lucent Technologies for $4.5 billion. Lucent closed the firm a year later. More recently, networking giant Cisco last year purchased Israeli video software company NDS for $5 billion.
One criticism of Israeli technology companies is that entrepreneurs have frequently looked to cash out quickly by selling their technology to larger companies. The result, say critics, is a big payout for company founders that creates few jobs and little broader economic benefit. The push into the consumer sector could bring a wider range of jobs to Israel and help foster more sustainable businesses.
Israeli tech investor Yossi Vardi said Google’s reported commitment to keep Waze based in for three years is a common feature of such acquisitions by foreign buyers to prevent companies from losing talent while relocating.