Israel’s high-tech industry has faced significant challenges since the outbreak of war with Hamas on October 7, 2023. A report by Startup Nation Central (SNC) reveals that nearly half of Israeli start-ups have lost investments due to the ongoing conflict. The report, based on surveys of investment fund partners, managing directors, and tech company founders and CEOs, paints a grim picture for the industry’s future.
Only 31 percent of companies are confident in securing funding next year, while 48 percent expect a decline in investments. Trust in Prime Minister Benjamin Netanyahu’s government to navigate the economic crisis is low, with over 80 percent of companies doubting the government’s ability to lead the industry’s recovery. In Northern Israel, where the distrust is as high as 90 percent, companies have been forced to relocate operations due to attacks by Hezbollah along the Lebanese border.
Despite the disruptions and poor projections, the Israeli tech industry has shown some resilience.
War disrupts Israeli startup funding
SNC reported that technology companies received $7.8 billion in private funding since the war began, a modest 4 percent year-on-year decline.
Mergers and acquisitions (M&A) transactions also saw a slight decrease from $10.6 billion to $9.6 billion. The war has taken a toll on the Palestinian enclave of Gaza, with the Ministry of Health reporting over 41,000 Palestinians killed, 95,000 wounded, and at least 11,000 presumed dead under the rubble of their homes. The conflict has displaced nearly two million people within Gaza.
Israel faces international condemnation and is currently on trial before the International Court of Justice for actions against Palestinians. Credit ratings agency Fitch downgraded Israel’s credit rating from “A+” to “A,” citing the impact of the ongoing conflict and heightened geopolitical risks. As the war continues, the future of Israel’s high-tech sector remains uncertain.
However, both companies and investors maintain cautious optimism about the industry’s long-term growth potential.
