Papaya Global, a Tel Aviv-based global payroll and payment management platform unicorn, declared on Thursday that it plans to withdraw all of its funds from Israel in protest of the emerging contentious judicial overhaul.
In a post on Twitter, Papaya co-founder and CEO Eynat Guez wrote that following Prime Minister Benjamin Netanyahu’s statements about the government’s determination to alter the judicial system, which she says will threaten the country’s democracy and harm its economy, Papaya has decided “to withdraw all of the company’s funds from Israel.”
“There is no certainty that we can conduct international economic activity from Israel,” Guez wrote. “This is a painful but necessary business step.”
Guez did not elaborate on what the decision means and how it will be put into practice in terms of Papaya’s day-to-day operations, and whether the move will affect its employees in Israel or where the company pays its taxes.
In recent weeks, senior executives from Israel’s business and tech community have taken to the streets to publicly voice their concern over the judicial overhaul advanced by Justice Minister Yariv Levin, which would severely limit the High Court’s ability to strike down laws and allow the Knesset to re-enact legislation that the court has struck down. It would also give Netanyahu’s coalition government control over judges’ appointments and allow ministers to appoint their own legal advisers.
Israeli entrepreneurs Guez, Ruben Drong, and Ofer Herman founded Papaya in 2016, and developed a workforce and payment management software platform geared toward different forms of employment including those on payroll, contractor work, and third-party recruiting and payment. The company employs more than 700 people around the world and has more than $3 billion in total payroll under management.
In 2021, Papaya raised $250 million in a funding round, sending its valuation soaring to $3.7 billion. Papaya says its services are used in over 140 countries. Among its clients are Intel, Microsoft, Toyota, and Wix.
Dovi Frances, founding partner of the Los Angeles-based VC firm Group 11 and an investor in Papaya and other Israeli companies, criticized the payroll and payment platform company for its intention to move all of its bank deposits out of Israel.
“It is true that a CEO has the full right to manage the company’s finances in whatever bank he or she sees fit, and the board is usually not required to be involved in such a decision, but that doesn’t mean that you can use a bank account as a political bargaining chip or a political statement,” Frances wrote in a LinkedIn post. “I am personally full of professional appreciation for Einat and appreciate her desire to express her political position but I really don’t support this move.”
“I don’t think it’s the way to express a personal political position, it just leads to a continuation of the division in the people,” he added.
Commenting on Papaya’s declaration, opposition leader Yair Lapid accused the Netanyahu government of driving the country into an “economic disaster.”
Finance Minister Bezalel Smotrich, responding to Lapid’s comment, said that there won’t be any “economic disaster as the Israeli economy is strong and profitable and investors are smart.”
Meanwhile, Herzliya-based Disruptive AI, an Israeli venture capital fund that invests in early-stage startups, said that foreign investors are concerned and are requesting that their capital is held in bank accounts outside of Israel.
Tal Barnoach, general partner at Disruptive AI, told Calcalist that the judicial overhaul is a “legal coup” and should it be passed will create economic instability.
“An economy is built on stability,” Barnoach said. “I am now in London. I have met my investors and they are very concerned.”
“They say that if the reform passes, it is not clear to them whether they will continue to invest in Israel,” he said.
Speaking out publicly against the judicial makeover, Guez told protesters in Tel Aviv last weekend that foreign investment in Israeli companies is a key ingredient to the local tech sector’s success, and will be threatened if democracy crumbles.
Citing $54 billion as the amount of foreign money invested in Israel in the last three years, Guez said that the government’s quest to quash court independence and power may threaten continued interest from investors.
“Without democracy, that $54 billion won’t be here and the tens of thousands of workers who joined high tech won’t be here,” Guez said. “No wealth holder will put money in a state where democracy is crumbling.”
“The startup nation can’t exist without democracy,” she added.