The ongoing conflict between Israel and Hamas has taken a toll on the Israeli tech startup scene, with a new report revealing that nearly half of these companies have experienced investment losses since the war began in October 2023. The Tel Aviv-based Startup Nation Central (SNC) conducted two surveys, one targeting investment fund partners and managing directors, and another focusing on tech company founders and CEOs, to assess the impact of the conflict. The findings paint a concerning picture, with 49% of Israeli tech startups reporting investment losses.
The report further reveals a lack of optimism about the future. Only 31% of companies expressed confidence in securing funding next year, and 48% anticipate a decline in investments. The Israeli tech sector’s trust in the Benjamin Netanyahu-led government’s ability to guide the economy through this crisis remains low, with a significant majority questioning the government’s effectiveness in navigating the situation.
The mistrust stems from the government’s handling of the conflict, particularly in securing the release of hostages and stabilizing the situation in the north, where Hezbollah has launched attacks on a near-daily basis. The report highlights that over 80% of companies doubt the government’s capacity to lead the industry’s recovery, with this distrust reaching 90% in Northern Israel.
Beyond financial repercussions, the war has also disrupted operations. The report indicates that 24% of companies have been forced to relocate operations, and 44% have reported shortages in human capital. Despite these challenges and bleak projections, the Israeli tech sector has shown resilience. The SNC reports that technology companies have secured $7.8 billion in private funding since the war began, a mere 4% decline year-on-year. Mergers and acquisitions (M&A) transactions have also been slightly impacted, dropping from $10.6 billion to $9.6 billion.
The report underscores the significant impact of the ongoing conflict on the Israeli tech sector, highlighting the need for a coordinated approach to address the challenges and restore confidence in the industry.
