Investment in Israeli tech sector plummeted in first half of 2023 — report

Investment in Israeli technology startups plummeted in the first half of 2023, an Israeli tech industry monitor says today, citing the government’s divisive judicial overhaul plan as a main driver of the downturn.

Start-Up Nation Central, a nonprofit organization that tracks and engages with Israel’s technology industry, says that it has seen a 29% decrease in private funding in Israeli tech in the first half of 2023 compared to the second half of 2022, and a steep drop in investor participation. Initial public offerings and mergers and acquisitions also hit a five-year low, it says.

The organization says that uncertainty in Israel because of the judicial overhaul “is already being felt with indicators such as decreased fundraising and fewer emerging Israeli startups.”

Yaniv Lotan, a vice president at Start-Up Nation Central, says the correlation between the judicial overhaul and investor hesitancy is clear. He says that while technology investment has stabilized in the US and globally over the past year, over the same period “here in the Israeli high-tech market, we are experiencing a continued downward trend.”

Israel’s high-tech sector is a major engine of the country’s economy, making up half of the country’s exports. It employs tens of thousands and its startup companies have drawn billions of dollars in investment in recent decades.

“In the end, markets don’t like uncertainty,” Lotan says.

The report is released a week after Prime Minister Benjamin Netanyahu’s coalition passed a law that weakens the Supreme Court’s oversight of government decisions, a key part of the government’s proposed judicial overhaul.

Since the plan was announced in January, Israel has been gripped by weekly mass protests, including from the tech industry itself, which warned that the overhaul would take a toll on its work. The plan has also drawn consternation from the White House and American Jewish organizations.