Top venture capital fund calls on its companies to move most cash out of Israel

Citing judicial overhaul and illiberal policies, Bessemer Venture Partners warns of a ‘new era of instability’ ushered in by an ‘unrestrained government’

Dollars and shekels. (Olivier Fitoussi/Flash90)
Dollars and shekels. (Olivier Fitoussi/Flash90)

One of the major investors in the Israeli hi-tech sector, Bessemer Venture Partners, issued a stark warning Sunday evening to its companies in Israel that they should consider moving cash and foreign currency out of the country’s banking system.

Since 2007, BVP has invested over $1 billion in some of Israel’s leading hi-tech companies, including Fiverr, HiBob, Yotpo, MyHeritage, and Wix.

In a letter addressed to its companies, the fund’s managers noted the government’s plan to push through a drastic legal overhaul, warning that Israel was entering “a new period of instability that is being characterized not by the unstable coalitions of the last four years, but by the unexpected policies of an unrestrained government.”

The letter added, “In its first six weeks in power, the government regularly ignores the opinions and warnings of experts including economists, bankers, investors and business owners. Instead, it calls for the imprisonment of certain critics and attacks the media.”

The company stressed that it still had faith in the Israeli hi-tech sector, and it understood that as it is export based, it had limited exposure to the local economy.

“We are confident in the strength of Israeli hi-tech… but have serious concerns that the current climate may cause a severe impact on non-technological foreign investments and on local consumption in Israel,” the fund wrote, and recommended reconsidering exposure to the shekel.

“Our recommendation is to maintain a shekel exposure of up to six months, and seriously consider holding foreign currency in overseas bank accounts,” it said.

Adam Fisher, partner at Bessemer Venture Partners in Tel Aviv. (Courtesy: Bessemer Venture Partners)

The letter comes as Israel’s association of investment houses also warned of a risk to the stability of the country’s public savings amid the government’s legal overhaul. These included top pension and savings funds such as Meitav, Altshuler Shaham, IBI, Yelin Lapidot, Psagot, Phoenix, Epsilon, and more.

The discontent among Israel’s financial elites about the overhaul is growing, with more and more organizations and institutions joining the calls to pause the process so that a compromise can be reached.

The government, however, is showing no signs of slowing down.

Prime Minister Benjamin Netanyahu’s Likud party, joined by its far-right and religious coalition partners, has said it is determined to pass the first reading of the overhaul bills Monday before engaging in any “dialogue” over its provisions.

Starting at 4 p.m., lawmakers will convene in the Knesset plenum to consider the first reading of a bill that would give the ruling coalition control of the Judicial Appointments Committee, which picks new Supreme Court justices. If the bill passes, as it is widely expected to do, it will move back to committee before two final Knesset votes.

The bill, which would amend a basic law, also includes a critical provision that would prevent the High Court from being able to overturn a Basic Law, protecting the controversial legislation from judicial oversight.

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