Nearly 70% of Israeli startups have taken action to relocate parts of their business outside Israel, as revealed in a survey conducted by Start-Up Nation Central. The survey aimed to assess the economic impact of the hard-right coalition government’s planned judicial overhaul, which intends to limit the Supreme Court’s authority to overturn legislation.
Protests have been ongoing for months as demonstrators express concerns that the proposed changes will undermine Israeli democracy by removing an important check on executive power. Business groups have also attributed a 70% decline in tech fundraising during the first half of the year to these proposed changes.
Significance of Israel’s Tech Sector
Israel’s tech sector plays a vital role in the country’s economy, contributing 15% of the economic output, 10% of the total jobs, over 50% of exports, and 25% of tax income. Notably, institutional investors have not played a major role in its success, with venture capital funds being the primary source of investment.
The survey, based on responses from 521 professionals representing various companies, highlights the following key points:
- 68% of Israeli startup companies have already initiated active legal and financial measures, including withdrawing cash reserves, relocating their headquarters outside Israel, and implementing layoffs.
- 22% of companies have diversified their cash reserves outside Israel.
- 37% of investors reported that companies in their portfolios have withdrawn some of their cash reserves and moved them abroad.
The CEO of Start-Up Nation Central, Avi Hasson, warned that certain concerning trends, such as registering companies abroad or launching new startups outside Israel, might prove difficult to reverse.
As the survey findings surfaced, lawmakers began debating a bill that seeks to prevent the Supreme Court from nullifying legislation based on the grounds of manifest “unreasonableness”. The proposed bill aims to address the concerns surrounding the government’s judicial overhaul.
The survey results indicate a significant level of concern and response within the Israeli startup community regarding the planned judicial overhaul. As the debate continues, it remains to be seen how the government and business sectors will navigate these changes and their potential implications on Israel’s thriving tech ecosystem.