Israeli technology saved us from the Iranians. So why isn't the Israeli government saving our technology?

Following the unprecedented direct attack from Iran on Israel in April 2024, celebrated Jewish-American businessman Bill Ackman noted in Calcalist that observing the events of that weekend was enough “to understand that Israeli technology has saved the country” and he mused “what country would not want what Israel has after seeing what happened…” in the Iranian attack.

Indeed, despite recent gas discoveries moving Israel towards energy independence, we remain a country with limited natural resources, making our human capital – and the high-tech ecosystem specifically – a key national resource that ought to be prioritized as the engine of growth that it is. Unfortunately, the Israeli government is not yet doing enough to support Israeli high-tech when it is so desperately needed.

Adv. Ron Abelski

The local ecosystem provides Israeli entrepreneurs with all the tools they need to succeed: a talented workforce, a rich history of successful role models, and a wide range of local and global investors waiting in line to contribute to, and benefit from, cutting-edge Israeli technologies. Between 2019 and 2022, Israeli technology companies raised a phenomenal $130.6 billion, with some 80% of the amounts invested during 2022 having foreign provenance.

Anyone looking will understand the high-tech sector’s contribution as a major catalyst for the Israeli economy’s growth over the past quarter-century in general, and in recent years particularly. This is so clearly demonstrated when considering that Israeli high-tech pays the bills of more than 435,000 families in Israel, and that in 2022 $71 billion of revenues were estimated to have come from the sector, with $14.9 billion in foreign investments flowing into the country.

Against the rosy backdrop, 2023 was not a good year for the Startup Nation. Indeed, in the shadows of political turmoil and the devastating attack in October, foreign investments fell by 60% in 2023 compared to 2022. The first quarter of 2024 was weaker still, and if the anti-Israel mood on the streets of US and European cities continues, it may continue to erode the resilience of the Startup Nation’s investment ecosystem.

Without access to critical funding, even the best teams with the best ideas will struggle to get their breakthrough technologies off the ground. The State has the tools at its disposal to turn the tide. Though it is true that certain government and quasi-government backed schemes are starting to take shape - such as the Innovation Authority’s scheme to match funding by Israeli institutional investors into Israeli VC funds - much more is needed, and fast.

We propose three immediate steps that should be taken: The creation and funding of a dedicated forum tasked with communicating the value and upside-returns possible from the Israeli high-tech sector, aimed at international investors; and to ensure that the brand and strategic value of investing in Israel stays top of mind. The forum should be composed of local venture capital fund managers, founders, advisors, as well as international players who continue to support the ecosystem.

Similar to the institutional investor matching program now available, the Israeli government should be heavily investing in financing local start-ups with additional matching programs aimed at foreign investors, and providing State-backed guarantees to protect, at least in part, such investments from the effects of geo-political events.

In addition, a package of grants and benefits should be approved for companies raising foreign money, such as beneficial tax treatment and reduced bureaucratic burdens.

There is a lot to be concerned about, but it is impossible not to remain optimistic when the miracle of Israel’s high-tech brand is considered. Our people are nothing, if not resourceful. With intense dedication, the State has the power to launch a new era of prosperity, rising from the deepest horrors since the Holocaust – after all, diamonds emerge from unthinkable pressure to provide beauty and value.

The author is a partner at the law firm of Epstein Rosenblum Maoz (ERM), specializing in mergers and acquisitions, venture capital investments and private equity.