Can Israeli hi-tech bounce back from the current crisis? – interview


The Israel Innovation Authority is launching a fast-track grant channel, with an initial allocation of 100 million NIS, targeting around 100 Israeli start-ups facing funding constraints due to the ongoing military conflict in Gaza.

The scheme will also involve contributions from private investors, with a collective commitment anticipated to exceed NIS 200 million. This concerted effort is poised to help Israeli startups extend their financial runway, offering them more time to leverage their existing resources and pursue their tech innovation endeavors.

Starting this November 2023, eligible companies can apply for this program.

Erel Margalit, founder and chairman of JVP and Margalit Startup City. (credit: SHAHAR AZRAN)

Compounding issues

Three weeks ago, Israel’s hi-tech sector was undergoing some serious turbulence. There were increasing reports of foreign investors pulling out of the start-up nation, resulting in much lower inflows of cash to start-ups, fewer deals being made overall, and a plummet in the number of unicorns (new companies valued at $1 billion or more) being born into the ecosystem.

Then a war broke out, following the most deadly assault against the Jewish people since the Holocaust.

In the ensuing weeks, the conflict has created a turbulent backdrop for one of the country’s key economic engines. The innovation authority’s program is one solution aiming to alleviate some of the pressure that the struggling hi-tech sector is currently undergoing.

“The hi-tech sector, which has faced declining investment volumes over the past 18 months, is also impacted by the current crisis. This impact is more pronounced in start-up companies that urgently need funding, especially during a challenging period when it is difficult to conduct new financing rounds,” said IIA CEO Dror Bin.

“From mapping the needs of startup companies in Israel, we understand that most of them are experiencing cash flow difficulties, delays and cancellations with potential investors, and the delay of significant projects and technological developments,” he noted, adding that “the channel is designed to provide certainty and cash flow that will help companies overcome the crisis and be an economic growth engine upon exiting it.”

Can hi-tech bounce back?

In a conversation with the Jerusalem Post, CEO of Jerusalem Venture Partners (JVP) and seasoned Israeli entrepreneur Erel Margalit noted that hi-tech’s operation — and often, success — during conflict is nothing new.

“The Israeli hi-tech industry is ambitious,” he said, recalling how many companies achieved remarkable success during the Second Intifada, despite the security threats. “Suicide bombings were happening in restaurants and buses. We were afraid to send our kids to school. Nevertheless, we built some of the most interesting companies ever during that time.”

Margalit believes that, in this way, the sector’s resilience is once again being tested in the current conflict. “When a crisis occurs, continuing to create and to do things in addition to facing the security crisis is very important. That’s what’s happening here,” he said.

“The hi-tech industry is moving forward. You’ll see it bounce back in a big way right after the war, which will hopefully be over soon. You’ll see the resilience and you’ll understand that the real victory image is not just on the battlefield, but also in the hi-tech industry continuing with all its force,” he said. “People are continuing to build and they’re building things for life, not for death. And I think that’s the real power of Israel.”

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