Number of startups that have fired workers rises to 29%, July survey shows
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Number of startups that have fired workers rises to 29%, July survey shows

Data depicts a situation that is ‘grim and more problematic than we previously envisioned at this stage of the crisis,’ says high-tech industry organization head

Protesters demand government action at a demonstration in Tel Aviv's Rabin Square against economic policy in the wake of the crisis triggered by the pandemic, on July 11, 2020. (Miriam Alster/ Flash90)
Protesters demand government action at a demonstration in Tel Aviv's Rabin Square against economic policy in the wake of the crisis triggered by the pandemic, on July 11, 2020. (Miriam Alster/ Flash90)

The coronavirus pandemic is still causing “significant difficulties” for Israeli tech firms, with 29 percent saying in July that they have fired workers, compared to 24% in a May survey, a new poll shows.

The data was compiled by the Israel Innovation Authority with the Israel Advanced Technologies Industries (IATI), based on a survey of 825 companies polled in early July.

The July data shows that half of the companies polled said they have halted the recruitment of new workers and half of them have cut back on salaries.

Sixty percent of startups that have reached the stage of selling their products reported that the pandemic has caused sales to drop over 25%. The drop was felt mainly by smaller firms.

IATI’s CEO Karin Mayer Rubinstein (Courtesy Yoram Reshef)

Twenty percent of the tech firms said they had taken no hit to sales, with 10% reporting that the pandemic had actually boosted sales; these firms are mainly health tech or gaming firms or startups that enable online sales.

Forty-five percent of the startups polled said they had enough cash to keep them going for less than six months (the so-called runway), and after that would need to raise funds to survive. A third of respondents said that as a result of the crisis they have slowed down or halted their research and development work.

Some of the data is an improvement on the May findings, the Innovation Authority and IATI said in a joint statement, but still points to a “significant hit” to firms, with more of them having had to implement layoffs.

The increase in layoffs is indicative of the fact that tech firms now believe that the crisis and the uncertainty it is causing will be here for the near future, and that painful steps are necessary to avoid a future closure of the firm, the statement said.

Along with a rise in the number of people fired, there is a decline in the number of people furloughed, the statement said. This does not point to a brighter picture, the statement said, but rather to the fact that many of those furloughed workers have now been fired. Furloughed workers are defined as those who are on unpaid leave and still maintain a relationship with their firm but are eligible for unemployment benefits.

Even so, some of the data is brighter: 55% of respondents said they had halted the recruitment of new workers compared to 71% in the May survey; and 45% said they had cut salaries, compared to 48% in the May.

In the July survey, 46% of respondents work in the software sector, 38% in healthcare and 16% in hardware and communications. Almost sixty percent of respondents worked in companies with 1-10 employees.

“Two months ago, many assumed that by now the health crisis would be behind us; however, the reality of an ongoing crisis has required companies to adopt severe policies regarding hiring and layoffs, investment in R&D, and new projects – and further moves can be expected in the aftermath of the second quarter,” said Aharon Aharon, the director general of the Israel Innovation Authority, in the statement.

The Israel Innovation Authority is in charge of setting out the nation’s tech policies and supporting the startup ecosystem. The IATI is an umbrella organization representing the high-tech industry in Israel.

Israel’s thriving tech industry saw firms raise a record $8.3 billion in 2019 from investors, largely VC funds and corporations, and a total of $39.1 billion for the period 2010-2019. Tech exits last year, defined as merger and acquisition deals or initial public offerings of shares, jumped 72% to a record almost $22 billion, according to data compiled by IVC Research Center, which tracks the industry.

“The current survey, based on an extensive sample of high-tech companies in Israel, indicates highly problematic trends in the Israeli high-tech sector, which should serve as a warning sign for decision makers,” said Karin Meir Rubenstein, CEO and president of IATI. “The situation it depicts is grim and more problematic than we previously envisioned at this stage of the crisis.”

Meir Rubenstein said the high-tech industry is “the locomotive of the economy’s growth, but unfortunately it will not last much longer” if it does not get assistance. “I call on the prime minister to make courageous decisions that will help the industry overcome this terrible crisis and to come out with a clear statement that it will devote the best means necessary to do so.”

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