One in five Israeli tech companies and startups have partially relocated operations and personnel abroad in recent months, driven by the challenges of conducting business and raising capital due to the suspension of foreign airline services to "Israel" during the recent war, The Times of Israel reported, citing a survey conducted by the Israel Innovation Authority (IIA).

According to the survey, at least half of these companies report that they face the risk of running out of funds within six months.

The survey, carried out in November with a sample of 664 tech executives, revealed that the most critical challenge during the war was securing essential financing, in addition to operational disruptions stemming from prolonged military reserve duty, flight cancellations, and heightened caution among global investors.

"We see companies struggling not only with capital raising and meeting development and sales targets but also with their very ability to operate in an environment deeply affected by the security situation, massive military reserve call-ups, and flight restrictions that complicate the management of global relationships," said IIA CEO Dror Bin.

"The entire ecosystem – government, investors, and companies – must come together to ensure the future of this industry, which is not only a critical growth engine but also a symbol of Israel’s innovation and leadership on the international stage," Bin underlined.

He further warned the government against making compromises during this crisis, urging it to "seize this crisis as an opportunity to build stronger infrastructure, improve the business environment, and increase investment in growing companies to ensure that Israeli high-tech returns to rapid growth and prosperity."

Approximately 14% of Israeli workforce employed in tech-related roles

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According to The Times of Israel, the tech sector's contribution to the Israeli economy has surged over the past decade, now accounting for nearly 20% of GDP—compared to less than 10% in the US and around 6% in the EU.

Approximately 14% of the Israeli workforce is employed in tech or tech-related roles across other sectors, with high-tech products and services comprising about half of total exports, the news website mentioned.

The IIA survey revealed that in November, Israeli tech firms increasingly turned to hiring foreign employees or agents, relocating staff overseas, and establishing international offices to mitigate operational challenges.

The report recalled that the suspension of foreign air travel, which began with the outbreak of the war on Gaza on October 7, 2023, significantly disrupted business activities. Over recent months, US airlines completely ceased flights to and from "Israel" due to escalating tensions between the Israeli military and the Islamic Resistance in Lebanon - Hezbollah.

Nearly 75% of surveyed tech firms reported that these flight restrictions and limited travel options impaired their ability to conduct business and secure foreign investments. Consequently, 80% of respondents indicated an urgent need to raise capital within six months, which the IIA described as an "alarming" trend.

The Times of Israel noted that in 2021 and 2022, approximately 80% of venture capital invested in Israeli startups originated from foreign sources, underscoring the importance of international funding.

The war has also significantly impacted the Israeli workforce, with thousands of tech workers and startup founders being called up for extended military service since October 7.

According to the report, about one-third of surveyed startups reported that prolonged military call-ups disrupted daily operations, causing delays in product development and missed deadlines.

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