Tech Triumphs: Israel's Resilient Tech Sector Thrives Amidst Conflict

Israel's thriving tech sector has faced numerous challenges in the past, including financial setbacks, the impact of the Covid-19 pandemic, and intermittent escalations in the Israeli-Palestinian conflict. Despite these obstacles, the industry has always managed to recover and showcase why Israel, with its relatively modest population of 9 million, is globally recognized as the "startup nation."

However, the recent conflict ignited by the Hamas attack over the weekend, which tragically resulted in the loss of over 1,300 lives in Israel, has brought about a disruption to daily life that presents an unparalleled test for the country's most crucial sector.

Schools have been instructed to shut down, the previously bustling streets in Tel Aviv, which is the hub of business, have now become eerily deserted, and a multitude of businesses still remain locked. A number of them are closed due to security concerns, while a significant proportion are unable to function as their workforce has been summoned for military duty.

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Avi Hasson, CEO of Start-Up Nation Central (SNC), a non-profit organization that champions Israel's tech industry worldwide, remarked that the current situation stands out as an unprecedented challenge.

"There are very few Israelis who have not been personally affected by the recent events. The level of uncertainty surrounding the outcome is quite high," he stated in his interview with CNN.

The technology industry is the largest sector in the Israeli economy. Prior to the outbreak of the war, the sector had already experienced a setback. Several tech executives attributed this to government proposals to undermine the judiciary, causing concern among investors and exacerbating the global decline in startup funding.

The tech industry in Israel has been greatly affected by the war, particularly in terms of its workforce. Over 300,000 military reservists have been summoned by Israel to participate in the war, majority of whom were already employed or studying within the country. It is estimated by SNC that around 10% of tech personnel in Israel have been conscripted, with certain companies experiencing a higher rate of up to 30%.

Approximately 6% of Monday.com's global workforce has been summoned, according to the Nasdaq-listed company headquartered in Tel Aviv. Leah Walters, the head of communications, assured CNN that as a global team, they have the ability to assist and uplift one another, and do not foresee any business interruptions.

Tel Aviv-based Monday.com says its operations have not been disrupted by the war.

Rafael Henrique/SOPA Images/Shutterstock

Startups need cash

Israeli tech companies, well-versed in dealing with armed conflicts, have devised comprehensive strategies to sustain their operations amidst wartime, as per Yaron Samid, the managing partner of TechAviv, a network for tech entrepreneurs. He further emphasized that the COVID-19 pandemic has additionally equipped their companies and workforce with the ability to work remotely from home.

Certain essential activities within the tech ecosystem cannot be performed remotely. This month, three significant tech conferences, including an artificial intelligence summit hosted by chipmaker Nvidia (NVDA), have been canceled. Nvidia's CEO, Jensen Huang, was scheduled to give a speech in person at the summit.

According to tech executives who spoke with CNN, fundraising and dealmaking may be affected as visits to the country cease abruptly and investors observe the situation's development.

Jon Medved, the CEO of OurCrowd, a prominent worldwide venture investing platform headquartered in Israel, expressed that the upcoming weeks will be difficult, particularly for individuals like us who are fundraising. He stated to CNN that a significant hurdle for a startup economy is ensuring the continuous flow of funds since most of these startups are not profitable and require ongoing investment.

Israeli startups continue to attract significant tech investment, despite a decline in venture capital funding over the past two years, following the global trajectory. According to the Israel Innovation Authority, a government agency, VC investments in 2021 reached an unprecedented $27 billion, surpassing the total investments of the previous three years combined.

Pledges of support

The tech industry accounts for 18% of Israels gross domestic product, about half the countrys exports and 30% of tax revenue, making its prosperity crucial to Israels economy.

Some industry insiders believe that the sector will be reinforced by the war as it is expected to attract support from investors who are eager to assist in the country's reconstruction.

"Despite the war, veteran investors who have previously supported Israeli startups are not withdrawing their support," stated Samid from TechAviv. "In fact, they are showing significant support during this period, just as they have done in the past."

As of Friday, a "Statement of Support" for Israeli startups, entrepreneurs and investors had attracted signatures from more than 500 VC funds from around the world.

On July 19, 2023, the al-Qassam Brigades, the armed branch of the Hamas movement, held a military parade near the border in the central Gaza Strip to commemorate the anniversary of the 2014 war with Israel. Palestinian fighters actively participated in the event.

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The statement emphasized Israel's longstanding role as a supportive partner in the global innovation ecosystem, contributing to remarkable technological advancements and entrepreneurial innovation. It further expressed the need for us to reciprocate this support by actively promoting and aiding Israel and the Jewish community.

Tech companies have also joined the war effort, putting aside their grievances with the government over planned judicial reforms. Their focus is now on supplying essential equipment to soldiers, finding missing individuals, and providing their expertise in areas like AI and cyber security.

"The unity seen among tech companies is incredibly important for the tech ecosystem," noted Hillel Fuld, a columnist and startup advisor. "The country has not been this united in a long time."

"SNC's Hasson emphasized that it's an urgent situation requiring everyone's participation. Major tech giants like Microsoft (MSFT) and Alphabet's Google (GOOGL) are also pitching in by offering digital services to assist first responders."

Despite the devastating circumstances, the tech industry in Israel has demonstrated its renowned resilience. According to Hasson, the Israeli tech industry has not come to a halt. Customers are still being served, code is actively being developed, and new ideas continue to form. The industry is functioning at a very high level of strength and stability.