JERUSALEM — Investment in Israeli technology startups plummeted in the first half of 2023, an Israeli tech industry monitor said today, citing the government’s divisive judicial overhaul plan as a main driver of the downturn.
Start-Up Nation Central, a nonprofit organization that tracks and engages with Israel’s technology industry, said that it had seen a 29% decrease in private funding in Israeli tech in the first half of 2023 compared to the second half of 2022, and a steep drop in investor participation. Initial public offerings and mergers and acquisitions also hit a five-year low, it said.
The organization said that uncertainty in Israel because of the judicial overhaul “is already being felt with indicators such as decreased fundraising and fewer emerging Israeli startups.”
Yaniv Lotan, a vice president at Start-Up Nation Central, said the correlation between the judicial overhaul and investor hesitancy is clear. He said that while technology investment has stabilized in the U.S. and globally over the past year, over the same period “here in the Israeli high-tech market, we are experiencing a continued downward trend.”
Israel’s high-tech sector is a major engine of the country’s economy, making up half of the country’s exports. It employs tens of thousands and its startup companies have drawn billions of dollars in investment in recent decades.
“In the end, markets don’t like uncertainty,” Lotan said.
The report was released a week after Prime Minister Benjamin Netanyahu and his allies passed a law that weakens the Supreme Court’s oversight of government decisions, a key part of the government’s proposed judicial overhaul.
Since the plan was announced in January, Israel has been gripped with weekly mass protests, including from the tech industry itself, which warned that the overhaul would take a toll on its work. The plan has also drawn consternation from the White House and American Jewish organizations.
Opponents to the judicial overhaul have cautioned that changes to the system of government could impel the country’s economy.
Recent weeks have seen international credit agencies warn about greater financial risk in Israel because of the Netanyahu government’s planned overhaul and the deep division it has caused.
Netanyahu and his allies say the changes are necessarily to curb what they say is an overly activist court and its unelected judges. Critics of the plan say that if passed, they will erode the system of checks and balances between branches of government and lead Israel toward autocracy.
Netanyahu took office in December at the head of the most ultranationalist and ultra-Orthodox government in Israel’s history following the country’s fifth election in under four years. Each of those parliamentary elections were largely seen as referendums on the longtime leader’s fitness to serve while on trial for corruption.