War Slows Funding for Tech Startups in Israel

U.S. investors are showing support for Israeli technology firms during the war between Israel and Hamas.

The high-tech sector in Israel, which is the world’s second-largest after Silicon Valley, has remained resilient, attracting venture capitalists and tech executives from the U.S., Reuters reported Thursday (Dec. 21).

A delegation of 70 U.S. tech executives and investors visited Israel during the conflict to support the country and contribute to its thriving tech industry, according to the report.

Investors and analysts initially predicted that the conflict would negatively affect the Israeli tech sector, which accounts for more than half of the country’s exports and nearly one-fifth of its overall economic output, the report said.

The war has taken a toll on the economy, exacerbating the already existing drop in funding due to a global slowdown and a divisive government judicial overhaul, per the report. The growth rate, originally projected at 3.4% for the year, has fallen to an expected 2%. Additionally, around 15% of the tech workforce has been called up for military reserve duty.

Despite the ongoing conflict, tech funding deals in Israel are still being completed, albeit at a slower pace, according to the report. Startups in the country have raised over $6 billion in 2023, compared to $16 billion in the previous year.

Ron Miasnik of Bain Capital Ventures, who co-organized the delegation of U.S. tech and venture capital executives, expressed confidence in the country’s economic rebound and long-term prospects, per the report.

The delegation’s trip aimed to strengthen ties between the U.S. and Israeli tech industries, according to the report. The visit included meetings with local investors, startups, Israeli leaders and families affected by the conflict.

The trip also served as an opportunity for investors to explore potential investments in Israeli cybersecurity and FinTech startups, the report said.

One out of every three cybersecurity unicorns in the world is based in Israel, and many of the country’s firms sell their products and services around the world, PYMNTS reported in August 2022. The country’s role as a lynchpin in the global cybersecurity ecosystem also means that local businesses are deeply embedded in payment networks and technologies.