The October 7th massacre and the war against Hamas are creating a significant, short-term impact and will likely have long-term repercussions on the Israeli economy. Even before the conflict, the Israeli tech ecosystem was dealing with challenges in raising capital, partly due to internal political instability and the effects of global economic challenges.
A survey conducted by the Start-Up Nation Policy Institute (SNPI) and the Israel Innovation Authority after the October 7th terrorist attacks revealed that over 80% of high-tech companies reported security-related setbacks. The survey included 500 Israeli high-tech firms and start-ups, of which over 40% experienced either cancellations or delays in investment agreements. Particularly alarming is the situation of companies facing imminent closure (within three months), where over 60% reported funding setbacks, with only 10% managing to secure investor meetings.
The recruitment of numerous employees into the IDF army reserves has also disrupted operations for many companies. More than a quarter of the companies surveyed indicated suffering a dual blow – both in terms of human resources and investments. In addition, venture capital reports suggest that numerous entrepreneurs have deferred launching their companies. Interactions with seed companies in the fundraising phase have also declined, demonstrated by reduced engagement and level of activity.
Technology remains the driving force behind Israel’s economic growth, and even amidst conflict, it is crucial to consider the post-war scenario. While Israeli tech firms are adept at functioning under pressure and display remarkable resilience and adaptability within the business ecosystem, swift action is imperative to renew investments in Israeli high-tech companies and startups. Remaining passive at this juncture would be a misstep. It is critical that we encourage investment, facilitate business development, and foster new partnerships now.
Forging partnerships with overseas companies has consistently fueled growth and success in the Israeli technology ecosystem. The Israel-U.S. Binational Industrial Research and Development (BIRD) Foundation, established in 1977 by the Israeli and U.S. governments to foster technological collaborations between U.S. and Israeli companies, has been initiating and leading such partnerships for over 46 years.
BIRD provides conditional grants for R&D collaborations between U.S. and Israeli companies. The benefits of this program to the Israeli high-tech community are significant and include:
- Access to Funding: Israeli companies and researchers leverage funding to advance technological development and research initiatives.
- Networking and Collaboration: Partnerships offer opportunities for Israeli companies and researchers to access new markets, technologies, and expertise.
- Enhanced Visibility and Credibility: Gaining access to cutting-edge research, facilities, and resources can significantly contribute to the development and success of Israeli companies.
- Market Expansion: By entering new markets companies can scale up and commercialize innovative products and services.
Overall, R&D collaborations provide Israeli companies with a platform to grow, innovate, collaborate, and contribute to global advancements in research and technology. These partnerships also provide a significant opportunity for building personal long-term relationships.
Since the start of the war, the BIRD Foundation has been closely observing the resilience of Israeli companies and how they are adapting to these extremely challenging circumstances. We have also witnessed the great understanding and support shown by U.S. companies working with their Israeli partners. These U.S. companies have shown their willingness to accommodate potential delays and changes, trusting their partners’ ability to deliver even under such challenging circumstances. We have also been encouraged by the many U.S. companies who have inquired about the safety and well-being of their Israeli colleagues. This solidarity, expressed in both peaceful and challenging times, ensures the enduring strength of the U.S.-Israel business relationship.
I strongly advocate for increased activity to cultivate even more successful partnerships between Israeli and U.S. companies. The BIRD program represents a space where enhanced funding can significantly contribute to the recovery of the Israeli technology sector while also benefitting our American partners.