Fighting with radical Islamist terror organization Hamas could slow the slow recovery of Israel’s tech industry. “Foreign investment will decline in the coming weeks and months,” predicts Jon Medved, director of venture capitalist OurCrowd. Avi Hasson, head of the nonprofit Start-up Nation Central, which brings together emerging companies and potential investors, is also skeptical.
“As long as we’re in the middle of a war, it’s hard to imagine any major deals happening.” Heavy fighting has been raging since Saturday, especially around the Hamas-controlled Gaza Strip.
In response to the radical Islamist group’s attacks, Israel is launching retaliatory strikes on Gaza and calling up 300,000 reservists, including employees of technology companies. This is a big burden in the short term, says Jack Ablin, founder of financial advisor Cresset. In addition, the protection of many business locations must be drastically increased; many technology companies have ties to the military.
Engine of the Israeli economy
The high-tech sector has been the fastest growing part of the Israeli economy for decades. The companies are among the world leaders in the fields of cybersecurity and artificial intelligence (AI), among other things. These activities account for approximately 14 percent of all jobs, nearly a fifth of total economic output, a quarter of Israel’s income tax revenues, and more than half of Israel’s exports.
However, the industry had already suffered setbacks before the fighting broke out. The bankruptcy of Silicon Valley Bank (SVB) resulted in the loss of a key lender. In addition, the controversial judicial reform of Prime Minister Benjamin Netanyahu’s government and the associated mass protests caused unrest among investors.
70 percent less capital than in the same period last year
According to a study by research houses IVC and LeumiTech, Israeli technology companies received approximately 70 percent less capital in the first half of 2023 than in the same period last year. However, in the third quarter the negative amount was only 14 percent, causing the downturn to lose momentum. According to the research, the sector has raised a total of around $5 billion (€4.7 billion) since the start of the year.
In the medium and long term, Hasson, the boss of Start-up Nation Central, does not expect any damage to the Israeli technology sector. “He has the ability to function during and recover from conflict. I don’t think investors will lose confidence in Israel anytime soon.”
According to Hillel Fuld, PR consultant for start-ups, the country could even benefit from the current wave of international solidarity. “This could help encourage investors who are hesitant to invest in Israel.”
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
