Mellanox Technologies founder Eyal Waldman says the legislative actions proposed by the prime minister-designate Benjamin Netanyahu’s coalition partners may pose a threat to Israel’s stable democracy and scare away investors.
Waldman is one of the signatories of a letter sent to Netanyahu last week to warn him that changes to the country’s democratic character and justice system are poised to have “dramatic consequences” for the economy in general and the high-tech industry, the growth engine of Israel’s economy, in particular.
“I am hearing questions from investors from outside of Israel asking about what is happening in Israel,” Waldman told The Times of Israel. “There are concerns about the proposed demands of the incoming government and their impact on parliament, the legal system and how the legal infrastructure will look like.”
Another concern is that ministers with a criminal record are set to be appointed by the incoming government, which does not look good to outside investors, Waldman added.
Waldman, who studied electrical engineering at the Technion Israel Institute of Technology, in 1999 set up Mellanox, a maker of high-speed servers and storage switching solutions that allow massive amounts of data to move within and between computers. US gaming and computer graphics giant Nvidia bought Mellanox for $7 billion in 2020.
Netanyahu’s incoming coalition bloc plans to curtail the judiciary, make changes to quasi-constitutional Basic Laws and grant sweeping powers in the West Bank to far-right lawmakers. A party leader with an anti-LGBTQ agenda has also been granted authority over some education programs.
The bloc, consisting of Netanyahu’s Likud party, two ultra-Orthodox factions and three far-right parties, has been pushing through the Knesset contentious legislation set down as political prerequisites for finalizing the hardline government ahead of a deadline for declaring a coalition in the coming week. The planned legislation includes a High Court override clause that will curtail the judiciary by allowing the Knesset to re-legislate laws that are struck down by the High Court.
The letter to Netanyahu, initiated by Erez Shachar, co-founder of Tel Aviv-based venture capital firm Qumra Capital, and signed by senior tech executives and serial entrepreneurs, comes as members of the incoming coalition have vowed to pass the override clause, and also to give the governing coalition of the day control over the panel that selects justices.
“Undermining confidence in the Israeli judicial system and as a result in Israeli democracy, and legislation that puts a question mark on the basic and fundamental rights of every person, regardless of who they are, may deter the investors who have driven the growth of this great industry,” the letter warned. “Damage to the status of the judiciary and harm to the rights of minorities based on religion, race, gender or sexual identity — will be a real existential threat to the great high-tech industry.”
More than one tenth of employees in Israel work in the country’s thriving tech industry, and pay a quarter of the country’s total income tax, according to the Israel Innovation Authority.
High-tech sector product grew by more than 10% in 2021 and stood at NIS 237 billion ($69 billion), accounting for 15.3% of Israel’s total GDP. High-tech exports exceeded 50% of Israel’s total exports and stood at 56% compared to 43% in the previous year.
Meanwhile, investments in Israeli startups dropped by 36% in the third quarter of 2022, compared to the previous quarter, with Israeli companies raising a total of some $2.8 billion between July and September this year.
Last year, Israeli companies raised a record $25.6 billion in private investments, shattering 2020’s $10.3 billion in funding. Foreign investments were the majority, accounting for a record $18.64 billion of the total capital, or 73%, a similar share to 2019 and 2020.
“Israeli high-tech and, as a result, the Israeli economy, has an abundance of foreign investments,” Shachar said. “Investors from abroad knew that they were investing in a country that has one of the best legal systems in the Western world, a safe and democratic island in the Middle East.”
Therefore “we have decided not to be silent any longer and to raise our voice and say ‘enough,’” Shahar remarked.
“We must not allow this to happen. The damage will be lamented for generations and the prime minister-designate must not allow this to happen,” he urged.
Other signatories on the letter include executives and senior managers of tech companies and investment firms such as Chemi Peres, managing partner and co-founder of VC Pitango; Shlomo Kramer, co-founder of Cato Networks; Yodfat Harel Buchris, managing director at Blumberg Capital; as well as founders at monday.com, Yotpo and Fireblocks.
Michael Eisenberg, partner and co-founder of Israeli venture capital firm Aleph, said he decided not to sign the letter after being approached by “several friends.”
“I didn’t sign because I went back and forth and didn’t find anything concrete,” Eisenberg tweeted. “The letter to me was mostly empty. What did I mostly not find there? What should be done.”
This is not the first appeal by Israeli tech community. Back in 2019, prominent members of the tech and business sector called on Netanyahu to resign from his post in light of the criminal charges in three corruption cases filed against him.
Times of Israel staff contributed to this report.