84% of Israeli Startup Investors Blame Judicial Reform for Negative Influence
According to a survey by Start-Up Nation Central, 80% of investors believe that any deterioration of relations between Israel and the United States will have a negative influence on the tech industry in Israel
Mandi Kogosowski
| 23/07/2023
Israelis working in the high-tech sector demonstrate against the government’s judicial reform. The sign reads “The High-Tech Protest.” January 2023. Photo; REUTERS/Corinna Kern
A whopping 84% of investors in Israeli startups said that the nation’s judicial reform has been negatively influencing their portfolio companies, and 78% of company executives reported that this reform is negatively impacting the activity of their company. This is according to the latest survey held by Start-Up Nation Central last week and published yesterday (Sunday).
Completed by 734 professionals representing 521 companies and investors, the survey was commissioned in order to “understand implications thus far in 2023 and the industry’s expectations into the future, in light of the judicial reform legislation and civil unrest that has now plagued Israel for the last six months.”
68% of Israeli startup companies have begun taking active legal and financial steps – such as withdrawing cash reserves, moving their headquarters outside Israel, relocating employees, conducting layoffs, and more – since the Israeli government introduced its judicial overhaul plan in January of this year.
In total, 76% of the nation’s startups have either taken or intend to “take active measures in light of the judicial reform and its implications,” according to the survey. Regarding investors, 67% of those asked are either investing or considering investing in foreign companies rather than in Israeli ones. And while 65% of investors already see signs of recovery in the US venture capital market, or believe that they will see them in the coming six months – only 12% said the same regarding Israel at the moment.
At present, 22% of companies report that they have moved cash reserves outside Israel – and of these, 53% said they moved abroad more than 30% of their cash reserves. 19% of companies say they laid off employees, and 25% of investors reported layoffs in their portfolio companies.
Another trend that showed clearly in the survey is that 80% of investors believe that any deterioration of relations between Israel and the United States will have a negative influence on the tech industry in Israel. President Biden and Prime Minister Netanyahu are at odds regarding the latter’s determination to legislate the reform (or overhaul) without a wide consensus, with tensions deepening over the Israeli government’s aggressive behavior in the West Bank and the current government’s general distancing from “shared values” with the US.
Israel’s high-tech sector accounted for 18.1% of its GDP in 2022, making it the largest sector in terms of economic output. According to the Israel Innovation Authority’s “State of the High-Tech Industry” 2023 report, the output of the high-tech sector grew more than twofold within a decade, reaching 290 billion shekels in 2022. Should this downward spiral continue, Israel is bound to find itself facing a major economic crisis.
“Companies and investors are taking active steps to move activity away from Israel and this behavior has increased significantly over the past three months. Concerning trends like registering a company abroad or launching new start-ups outside Israel will be hard to reverse,” said Start-Up Nation Central, CEO Avi Hasson.
“As an organization with a mission to strengthen the technology industry in Israel, it is our duty to share this data with decision-makers in Israel and provide an up-to-date picture of the situation as it unfolds.”
Founded in 2013, Start-Up Nation Central is a non-profit organization that strengthens Israel’s innovation ecosystem and forges global partnerships. Prior to his role as CEO, Hasson served as Chief Scientist at Israel’s Ministry of Economy and Industry and as the Founding Chairman of the Israel Innovation Authority.
According to a survey by Start-Up Nation Central, 80% of investors believe that any deterioration of relations between Israel and the United States will have a negative influence on the tech industry in Israel
Israelis working in the high-tech sector demonstrate against the government’s judicial reform. The sign reads “The High-Tech Protest.” January 2023. Photo; REUTERS/Corinna Kern
A whopping 84% of investors in Israeli startups said that the nation’s judicial reform has been negatively influencing their portfolio companies, and 78% of company executives reported that this reform is negatively impacting the activity of their company. This is according to the latest survey held by Start-Up Nation Central last week and published yesterday (Sunday).
Completed by 734 professionals representing 521 companies and investors, the survey was commissioned in order to “understand implications thus far in 2023 and the industry’s expectations into the future, in light of the judicial reform legislation and civil unrest that has now plagued Israel for the last six months.”
68% of Israeli startup companies have begun taking active legal and financial steps – such as withdrawing cash reserves, moving their headquarters outside Israel, relocating employees, conducting layoffs, and more – since the Israeli government introduced its judicial overhaul plan in January of this year.
In total, 76% of the nation’s startups have either taken or intend to “take active measures in light of the judicial reform and its implications,” according to the survey. Regarding investors, 67% of those asked are either investing or considering investing in foreign companies rather than in Israeli ones. And while 65% of investors already see signs of recovery in the US venture capital market, or believe that they will see them in the coming six months – only 12% said the same regarding Israel at the moment.
At present, 22% of companies report that they have moved cash reserves outside Israel – and of these, 53% said they moved abroad more than 30% of their cash reserves. 19% of companies say they laid off employees, and 25% of investors reported layoffs in their portfolio companies.
Another trend that showed clearly in the survey is that 80% of investors believe that any deterioration of relations between Israel and the United States will have a negative influence on the tech industry in Israel. President Biden and Prime Minister Netanyahu are at odds regarding the latter’s determination to legislate the reform (or overhaul) without a wide consensus, with tensions deepening over the Israeli government’s aggressive behavior in the West Bank and the current government’s general distancing from “shared values” with the US.
Israel’s high-tech sector accounted for 18.1% of its GDP in 2022, making it the largest sector in terms of economic output. According to the Israel Innovation Authority’s “State of the High-Tech Industry” 2023 report, the output of the high-tech sector grew more than twofold within a decade, reaching 290 billion shekels in 2022. Should this downward spiral continue, Israel is bound to find itself facing a major economic crisis.
“Companies and investors are taking active steps to move activity away from Israel and this behavior has increased significantly over the past three months. Concerning trends like registering a company abroad or launching new start-ups outside Israel will be hard to reverse,” said Start-Up Nation Central, CEO Avi Hasson.
“As an organization with a mission to strengthen the technology industry in Israel, it is our duty to share this data with decision-makers in Israel and provide an up-to-date picture of the situation as it unfolds.”
Founded in 2013, Start-Up Nation Central is a non-profit organization that strengthens Israel’s innovation ecosystem and forges global partnerships. Prior to his role as CEO, Hasson served as Chief Scientist at Israel’s Ministry of Economy and Industry and as the Founding Chairman of the Israel Innovation Authority.
