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Israeli tech sector faces many uncertainties amid conflict

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The devastating and surprising attack that hit Israel last weekend is impacting many segments of society – and the country’s tech and startup community is no exception. As a nation known for its innovation and technological prowess, Israel’s industrial technology sector has long been a global leader, with the country being a House to more than 6,000 startups and nearly 100 unicorns. In 2022, the city of Tel Aviv alone had 30 new unicorns and 20 scale-ups on the stock market.

However, recent attacks against Israel by the terrorist organization Hamas also threaten to cast a shadow of uncertainty over the future of the ecosystem and temporarily halt its development.

The conflict has already resulted in the loss of thousands of lives, and as it unfolds, The Recursive has called on industry voices to shed light on the challenges Israeli startups and businesses currently face.

Although emergencies are no stranger to Israel, the ongoing conflict could spark reluctance among some companies and investors to work in war zones, says Yehuda Binder, a veteran Israeli entrepreneur and patent expert.

Most high-tech companies continue to operate, but people are working from home or in shelters. The only impact is likely to be on businesses and investors who are hesitant to invest or work in war zones. This is the reason why many startups have offices in the United States or elsewhere in Israel,” he told The Recursive.

Military service and mobilization as main challenges

For Udi Alroy, co-founder and CEO of food tech startup CarobWay, maintaining business operations despite the crisis is one of the most important challenges of the moment.

Although 30% of its workforce was called up for military service, the company managed to continue operating.

“The main challenge we face is ensuring adequate manpower for daily operations, and we are grateful for the commitment of the volunteers who have joined us in this effort. Despite some disruptions, such as delayed or canceled flights, Israel is fully operational and all deliveries are proceeding as planned,” Alroy told The Recursive.

As he further points out, the availability of Israeli labor is essential to the smooth running of business operations at present.

Our employees have demonstrated incredible strength, showing up for work and making themselves available 24 hours a day. Although some tasks are being completed remotely to accommodate parents who need to stay with their children, overall our operations remain functional,” he adds.

Entrepreneurs such as Kobi Avidan were drafted to serve in the military. Although this is a duty that every Israeli seeks to fulfill, when it comes to running a business, there are other responsibilities that must be fulfilled.

“With some employees, including myself, called to serve in the military, we are facing temporary manpower shortages, requiring rapid adjustments to effectively manage responsibilities during this difficult time,” Avidan said , CEO and co-founder of nutritech startup Novella, at The Recursive. .

Additionally, the company also experienced disruptions to core activities, such as attending trade shows and meeting with potential investors.

“Essential flights to attend trade shows in the United States and visit potential customers and investors in Canada have been disrupted, impacting our ability to showcase our products and establish key partnerships. The temporary cessation of activities with investors introduced uncertainties in financing and strategic planning, requiring agile responses to maintain stability,” explains Avidan.

The ecosystem must prepare for long-term impacts

For both Alroy and Avidan, in the long term, the conflict may have a nuanced impact on Israel’s tech and startup ecosystem.

“Historically, Israel has demonstrated resilience and a remarkable ability to bounce back from adversity. As the situation stabilizes, we expect renewed interest in strengthening the technology ecosystem. The challenges we face today could foster a spirit of innovation and collaboration as businesses adapt to the new normal,” emphasizes Avidan.

However, the path to stability may be gradual, as startups and their employees will have to navigate uncertainties and potential changes in the investment landscape.

“In times of conflict, meeting the challenges faced by startups becomes particularly demanding. Simply having a proprietary technology or innovation is not enough. It is imperative to foster a positive work environment, effectively communicate your vision to employees and farmers, and ensure their income security,” adds Alroy.

So, aside from the hope that this would be a long-lasting conflict, there is also the hope that it will ultimately result in some sort of resolution that will bring peace to the Middle East region for much longer.

“Our thoughts are with all those affected by the conflict, and we fervently hope for a speedy resolution and lasting peace,” concludes Avidan.

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