Beyond Oil: What the UAE Can Learn from Israel's Innovation Economy
Benjamin Halimi | Sam Kunin
Israel and the UAE both have populations roughly the size of New York City and face significant security challenges. Yet, Israel has no oil, and still raises more venture capital per capita than the United States. It is this model that The United Arab Emirates is now trying to learn from, planning a future in which they are not reliant on oil and setting a national target to make non-oil sectors account for 80% of its GDP by 2031, positioning technology and innovation as the foundation of its future economy. The UAE has increasingly looked to its regional neighbor, Israel, as a model for how a resource constrained economy can successfully diversify through tech innovation, an ecosystem Israel built through a military pipeline of trained founders, an immigration wave of scientific talent, and an early government program that successfully seeded a self-sustaining private venture capital market. The UAE is taking steps in leveraging military conscription, immigration, and market integration, but it must deepen these commitments to translate structural investments into a self-sustaining innovation economy. Israel’s high-tech sector demonstrates that a small country can compete at the highest levels of the global economy through innovation alone, an achievement notable given that its traditional sectors like banking, cement, and infrastructure have remained relatively concentrated among a small number of firms. A similar pattern of concentrated, less mobile asset ownership exists in the UAE, where land, utilities, and major industrial holdings remain held by ruling families. In both cases, the innovation economy developed alongside, rather than replacing these structural constraints.
Unit 8200, the IDF’s largest military intelligence unit, effectively functions as one of the most productive technology incubators in the world. Soldiers in Unit 8200 are tasked with operating cybersecurity, data, and surveillance systems. They are given significant responsibility at young ages and are trained to make high-stakes decisions within flat organizational hierarchies where competence matters more than rank. Unit 8200 alumni have gone on to co-found companies including CyberArk, an identity security platform, Palo Alto Networks, a global cybersecurity company, and Wix, a website builder, and the unit’s broader alumni network has been credited with generating billions of dollars in startup value. According to Forbes, more than 1,000 companies have been founded by Unit 8200 veterans, collectively valued at over $50 billion. This pipeline processes a large portion of the Israeli population each generation, producing a sustainable base of technically trained professionals that flow directly into the startup economy. The UAE is following a version of this model more deliberately than is often recognized. In 2014, the UAE instituted compulsory national service, and according to a 2020 report by the American Enterprise Institute, the UAE’s Presidential Guard and Special Operations Command have developed a professional military subculture that prizes “innovation”, “critical thinking,” and “entrepreneurship,” precisely the traits most associated with startup founders. The core limitation is that this culture remains concentrated in a small elite rather than distributed broadly. The UAE’s next step is to widen that pipeline so that the professional culture being built at the level of its special forces begins to spread into broader national service cohorts and, eventually, into civil society.
Israel’s startup ecosystem was further spurred by immigration. Following the fall of the Soviet Union, approximately one million Soviet Jews emigrated to Israel throughout the 1990s, a wave that included a disproportionately high number of scientists, engineers, and mathematicians. This cohort introduced substantial technical depth into an economy that was already beginning to develop its technology sector, and it significantly expanded the human capital available to early Israeli startups. Launched in 1993, the Yozma program mobilized this human capital by matching foreign venture capital investments through co-investment funds that combined public and pirate capital. Additionally, it offered a built-in exit clause that allowed private investors to purchase the government’s stake at a fixed price as companies matured. This design ensured that profits accumulated in the private sector over time, and the government gradually stepped back as the venture capital market became self-sustaining. By 2000, Israel’s venture capital industry had grown from nearly zero to over $3 billion in annual investment.
The UAE’s situation today bears a structural resemblance to Israel’s in the 1990s. The UAE is already one of the most immigrant-dense countries in the world, with expatriates making up approximately 88% of its total population. Programs like Hub71, launched in Abu Dhabi in 2019, and the Golden Visa, which offers long-term residency to entrepreneurs and investors, are meaningful steps in the right direction. Reports from Wamda, a regional platform focused on MENA entrepreneurship, have documented how these programs have successfully drawn founders from South Asia, Europe, and across the Arab world. According to the Startup Genome Global Ecosystem Report, Hub71 startups have raised a cumulative $2.17 billion in funding as of 2025. However, Yozma was explicitly designed to transfer ownership to the private sector over time. For the UAE’s model to produce a similarly durable result, its sovereign investment vehicles, including Mubadala, which manages over $300 billion in assets, will need to follow the same principle and actively cultivate private venture capital infrastructure that can eventually operate independently of state support.
One of the most underappreciated drivers of Israel’s startup success is the orientation of its founders toward US and European markets from the very beginning. Because Israel’s domestic market is small, Israeli startups are built for international customers from day one. According to Startup Nation Central, the standard trajectory for a successful Israeli company has been to raise seed capital locally, build the product in Tel Aviv, and then relocate the go-to-market function to the United States around the time of a Series A. In 2025, Israeli startups raised $15.6 billion in funding and recorded $74 billion in exits, anchored by Google’s $32 billion acquisition of Wiz, and Israel now ranks in the global top five for startup capital raising alongside San Francisco, New York, London, and Boston. The UAE’s startup ecosystem is currently more regionally oriented, which represents one of its central limitations. Most UAE-based startups are building primarily for regional markets rather than competing directly in the US and Europe. To replicate the depth of Israel’s ecosystem, the UAE government should structure Hub71 and similar programs to explicitly prioritize startups with US or European market strategies and build deeper partnerships with American and European venture capital firms. The Abraham Accords, signed in September 2020, have already opened direct channels to Israeli expertise and co-investment, with bilateral trade reaching approximately $2.5 billion within two years of normalization. The UAE should use these channels not only to access Israeli technology but to internalize the global market orientation that has made Israeli innovation so commercially successful.
The UAE has made substantial progress in constructing the institutional infrastructure of a modern startup ecosystem. Hub71 is operational and scaling, Mubadala deploys capital at a globally significant level, and the Golden Visa has successfully attracted international entrepreneurial talent. These outcomes reflect a sustained and well-resourced government effort to diversify the national economy away from its dependence on oil revenues. However, Israel’s model was not primarily built through infrastructure. It was built through people: veterans trained to operate under pressure, immigrants with deep technical expertise, and a government program that seeded a market and then stepped aside to let private actors take over. To move from a structurally strong ecosystem to a self-sustaining one, the UAE must widen the professional culture of its special forces into broader civil society, design its capital programs to cultivate private venture markets rather than permanently substitute for them, and push its founders to orient toward US and European markets rather than remaining regionally focused. The infrastructure is firmly in place. Whether the UAE can develop the organic, globally ambitious entrepreneurial culture that drives Israel’s model ultimately depends on how deeply it commits to each of these next steps. To translate it into a self-sustaining innovation economy, the UAE should commit to three measures: extend the entrepreneurial training culture of its special forces into national service, restructure Mubadala and Hub71 deployments around Yozma-style causes that transfer ownership to private venture firms, and tie Hub71 admission to demonstrated US or European market traction rather than regional revenue alone. Without these commitments, the UAE risks becoming an innovation economy without the culture that makes Israel’s model work.
Benjamin Halimi (CC ‘29) is a writer at CEMR studying financial economics. His interests include the MENA region and renewable energy.
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