Israel’s High-Tech Leaders May Leave
TEL AVIV — For years, budding Israeli tech executives have asked Yanki Margalit, a veteran entrepreneur, where they should start their companies. For years, he has said: here, in Israel, where software engineers are plentiful, international investors are eager, and friends and family live.
But as Mr. Margalit, 60, prepares a new venture of his own, one focused on combating climate change, he has reluctantly concluded that Israel is the wrong place to launch.
“Given the atmosphere now, it’s almost irresponsible to start a company here,” he said, “and that is heartbreaking.”
The luminaries of Start-Up Nation, as Israel has been known for decades, are looking at the exits. Several are relocating or moving money out of the country, including the chief executive of Papaya Group, a payroll company valued at over $1 billion.
The reason is that a rightwing government, led by Prime Minister Benjamin Netanyahu, recently announced plans for a sweeping overhaul to the country’s judiciary that many believe will end its 75-year run as an independent institution. The changes, which have prompted mass protests, would severely curtail the court’s capacity to strike down laws passed by the Knesset, the country’s Parliament, and give the ruling coalition far greater
Judicial changes could put an end to Start-Up Nation.
say in who sits on the bench.
“It took a lot of time to build this brand,” said Assaf Rappaport, the chief executive and co-founder of Wiz, a cloud security company worth $6 billion, “and today every company in the world can trust Israel as a partner in their cyberdefense. These reforms will put all that in question.”
The office of Israel’s minister of finance, Bezalel Smotrich, declined to comment. In a statement last month, he said claims that the reforms harmed democracy were part of a “scaremongering campaign.”
Some 54 percent of Israel’s exports are high-tech products and services, according to the Israel Innovation Authority, a support arm of the government. Israelis have created more than 90 “unicorns” — privately held companies valued at more than $1 billion. Losing top-level earners and corporations would be devastating in a country where 81 percent of tax revenue comes from just 20 percent of the population.
Adam Fisher, a partner in Bessemer Venture Partners, which has backed more than 30 start-ups in Israel, said money from Bessemer and other venture capital firms — 90 percent of all investment in Israeli tech comes from foreign sources — will follow the entrepreneurs.
“When I invest in Israel, I’m not really investing in the Israeli economy,” he said. “I invest in entrepreneurs, and if those entrepreneurs want to set up somewhere else, that’s fine.”
Mr. Margalit is considering cities like London, Paris and New York for his new business.
“If they pass this legislation,” he said, “what are my options?”