Israeli Tech Resilience: A Start-Up Nation Central FAQ

Israelis are known for their resilience and it is no surprise that this is also a main characteristic of the local tech ecosystem.

Despite the challenges facing Israel today, our country’s tech ecosystem remains resilient and full of opportunities. The recent attacks by Hamas have been painful for us all, but support from multinationals, governments, and individuals worldwide is strengthening our recovery. Together with the unwavering spirit of Israeli innovation, this support is crucial in our reconstruction efforts.

Start-Up Nation Central has initiated a number of efforts to strengthen the resilience of the Israeli innovation ecosystem, including providing access to funding opportunities, business introductions, and mentorship, and developing informational materials about Israeli tech’s ability to deliver – no matter what

Israel’s tech industry remains not only resilient but full of opportunities. We’ll be updating this FAQ frequently, so pin this page for quick reference. 

 

Q: How has the current situation impacted the local economy?

A: Israel has a strong and stable economy. Even during the global COVID downturn, Israel weathered that period better than almost any other country.

With that being said, currently, there are declines in Israel stock indices, but also quick recoveries. The TA125 has seen a greater drop than previous conflicts. Global Ratings lowered Israel’s credit outlook from stable to negative, citing risks that the Israel-Hamas conflict could broaden with a more pronounced impact on the economy.

Despite these dips, it is important to keep in mind that Israel has persevered through difficult periods time and time again, always emerging with a stronger economy than before.

 

Q: Israel typically has a high economic growth rate, has that changed now?

A: The Bank of Israel Research Department revised its macroeconomic forecast based on initial information. The new forecast sees GDP growing by 2.3% in 2023, and 2.8% in 2024, with the expected impact increasing the government’s budget deficit to 2.3% of GDP in 2023, and 3.5% of GDP in 2024. The debt-to-GDP ratio is expected to be 65% at the end of 2024.

Israel’s economic recovery in previous conflicts has been rapid, with GDP growth, exports, FDI, and stock indices all typically recovering within  1-2 quarters. Currently, the Israeli tech sector is active at pre-war levels, buttressed by remote work and lower costs driven by a favorable exchange rate.

 

Q:  Have there been significant disruptions to the high-tech industry?

A: While there are real challenges, both on a human and economic level, Israel’s tech ecosystem stands strong and remains a primary economic driver. Businesses continue to meet milestones and serve customers.

The tech workforce has been impacted by only 10-15% due to military service. Most companies have most of the team and leadership focused on business continuity. Where individuals are unavailable, a swift handover has ensured that businesses continue to function and flourish. In addition, many experienced industry leaders are volunteering their time to support smaller companies during this time.

Paradoxically, the strengthening of the dollar against the shekel is helping our businesses since revenue in the tech sector is mostly in dollars. The weakened shekel also means Israel becomes a cheaper option for multinational companies.

 

Q: How are multinational corporations involved in the Israeli tech landscape during this period?

A: Over 450 multinationals operate R&D and innovation centers in Israel. Their ongoing support and commitment highlight the confidence they have in our ability to deliver, no matter what. (Examples include Google, Microsoft, Amazon, Nvidia, Meta, and many others). These MNCs continue to operate uninterrupted alongside Israeli global companies that continue to serve their customers abroad.

 

Q: Are some early-stage startups at risk?

A: The Israeli government and investor community are taking steps to ensure that good companies have enough runway to get through this period. For example, the government, through the Israel Innovation Authority, has launched a $100 million emergency fund to assist startups. This support helps fill gaps for startups and keep them operating normally during this time. It is widely anticipated that the government will increase this assistance based on market conditions and needs.

 

Q: How does the industry’s past experience with crises inform its current response?

A: Our tech industry has shown remarkable resilience through past security crises. We’ve been able to maintain investment stability and even grow our exports over the last 15 years, and we have done this in the face of conflict, a global pandemic, and other extreme conditions. .

 

Q: How has the experience of dealing with COVID-19 contributed to current resilience?

A: The pandemic prepared us in unforeseen ways, such as making remote work a norm. These capabilities have been invaluable in adapting to the current challenges.

 

Q: How is the tech community participating in crisis management?

A: There’s significant civilian mobilization, and the tech sector is playing a major role. Whether it’s through volunteering, developing solutions, or funding various causes, we are stepping up. This is common to small and large companies alike – everyone is contributing however they can.

Israel’s tech sector is a pillar of resilience and innovation. Despite current hardships, companies continue to operate, serve global markets, and maintain relationships with partners and investors. We’re agile, we adapt, and we persevere. Israeli tech delivers – NO MATTER WHAT.

 

Q: What parameters contribute to the strength of Israeli tech?

A: There are four key positive parameters:

1. Software Focus: Israeli tech has a strong focus on software, which mitigates challenges related to supply chains, transportation, and hardware.

2. Geographical Density: Most Israeli tech companies operate in the Tel Aviv area – the heart of the country. Daily life here continues relatively unaffected, thanks to Iron Dome’s protection. In the aftermath of the pandemic, remote work capabilities enable team members to collaborate effectively, whether in the office or at home.

3. Export Orientation: Israeli tech companies are export-oriented and global demand remains robust. As long as these companies continue providing their services, economic activity persists.

4. Exchange Rate: The exchange rate between the shekel and the dollar can be a positive influence. The strengthening of the dollar against the shekel is helping our businesses since revenue in the tech sector is mostly in dollars. The weakened shekel also means Israel becomes a cheaper option for multinational companies.

For more information on how Israel’s tech ecosystem continues to deliver, visit: https://startupnationcentral.org/support-center/