Mobileye founder warns about how war, judicial overhaul hurt Israeli tech
Prof. Amnon Shashua says that while Israelis are used to living in a routine of war, the uncertainty puts off foreign investors and clients, hurting the local tech environment
Sharon Wrobel is a tech reporter for The Times of Israel.
Mobileye founder and one of the most prominent serial entrepreneurs Prof. Amnon Shashua estimates that the uncertainty over the trajectory of Israel’s war with Hamas will continue to harm investor sentiment and the local technology ecosystem at least until the end of 2025.
Speaking at an annual tech conference by consultants PwC Israel and the Goldfarb Gross Seligman law firm in Tel Aviv on Wednesday, Shashua was asked about the impact of the war on the economy in general and the local high-tech industry in particular.
“If we refer to Israel’s macroeconomic problems, we should first define them: one difficulty is the judicial overhaul and all the protests that accompanied it [last year], and since October 7 the war and the uncertainty,” said Shashua. “The situation harms our work with clients because they are outside of Israel, it harms the ability to raise money and it harms the value of Israeli companies, which if they were put in Silicon Valley, they maybe will get a higher value.”
Shashua, co-founder of Jerusalem-based maker of autonomous vehicles Mobileye (an Intel company), is also the co-founder of Israeli startup AI21 Labs, a natural language processing (NLP) company, which has the vision to bring generative AI to the masses and competes against OpenAI.
Shashua noted that both customers and investors do not like security uncertainty, which is now not so much anymore about what is happening in Gaza, but rather has shifted to concern about what is happening in the north of the country and the question of whether there will be an all-out war, and if there will be business continuity.
“As Israelis, we are used to uncertainty and routine under fire, but outside of Israel investors and customers do not like uncertainty,” he noted.
“So on the one hand what has not been harmed is the Israeli talent that is still here — at the beginning of the war about 20% of the workforce in high-tech was called into reserve duty and today this is already only a few percent,” said Shashua. “We employ about 5,000 people and no one has left to live abroad so I don’t detect any signs of a brain drain.”
“But on the other hand, it is hard for investors and customers to come to Israel even though US airlines stopped flying which is a scandal and turns us into a warzone where out of sight is out of mind – this harms the local ecosystem,” he remarked.
Shashua reckoned that the damage to the tech industry could be short-lived once the uncertainty is removed with the end of the war, which has been raging for almost one year.
“I think it has nothing to do with which government leads our country — unhealthy governments are already a global disease,” said Shashua. “The problem is the uncertainty, and I believe that by the end of next year we will be able to get out of it.”
Shashua noted that because of the war developments in technology in the field of artificial intelligence were progressing well as during the fighting you constantly need to find solutions to problems, while research budgets in academia have suffered in recent years, he said.
“There are fewer research grants, and this is where the government is not doing enough,” he lamented. “The focus needs to be on research funds, which is not such a big investment, with a few hundred million dollars you can do a lot, but the state doesn’t put enough budgets there.”
Data presented at the conference attended by about 250 young entrepreneurs, investors and lawyers showed that as tech firms struggle to raise capital and grow during the war period, the activity of mergers and acquisitions has picked up this year.
The number of M&A deals this year up until the end of August increased to 39 compared to 35 during the same period in 2023 before the outbreak of the war, according to PwC Israel. The value of M&A deals totaled $6.3 billion compared with $3.2 billion during the same comparative period.
Large-value transactions were more prominent so far this year as the average value of the deals increased to $161 million from $93 million, according to the data. Six out of the 10 biggest acquired companies were established only five years ago.
“We want Israeli high-tech to stay in Israel but unfortunately we are hearing of many companies that register in the US and that entrepreneurs want to follow,” said Yaron Weizenbluth, partner and head of the high-tech cluster at PwC Israel. “The tech industry will continue to be the growth engine of Israel’s economy in 2025 and in the decade ahead, provided that new startups in general and AI companies in particular will be established in the country.”
Asked about the options for young entrepreneurs to establish new startups in Israel or abroad, Shashua said that after founding a new AI company 10 months ago, he came to the conclusion that opening in Israel is better.
“If you register a company in the US, but the management, control and R&D are in Israel, the company will still be subject to taxation in Israel and will not necessarily get the discounts Israeli companies get,” he said.
