October 7 hurt us – but we’re not the Shut Down Nation
Foreign investment plunged after the Hamas atrocities – but those close to Israel’s tech sector remain optimistic
Fifteen per cent of the tech sector is on reserve duty
IN THE wake of October 7, there were real fears that the Start Up Nation was in danger of shutting down.
Long before the war, foreign investment in Israel was declining as businesspeople across the world flinched at a country apparently eating itself with non-stop political protests.
Then the war came. According to the FT, investment in Israel dropped from $1billion (£795million) in September 2023 to just $300million in October. Many investors said while they weren’t pulling their money entirely, they were just anxious and wanted to wait out the war before committing.
Business hates uncertainty, and this could yet have serious negative effects on an economy built on foreign investment. Capital inflows are substantially higher than other countries in the region – a reward for the government’s massive research and development spend (the most in the world as a percentage of GDP). But amid the turbulence, there are glimmers of hope.
Start Up Nation Central (Sunc), an NGO named after the 2009 book by author Dan Senor, is an enterprise whose sole aim is selling Israel to the world. Matching foreign investors with innovative Israeli companies, SUNC is based in the heart of Tel Aviv, a stone’s throw from celebrity chef Eyal Shani’s first restaurant, its staff are working to make sure the world understands that Israel’s lucrative tech sector – which employs as many as 15 per cent of all Israelis, from global tech giants to tiny embryonic businesses – is alive and kicking.
Aviva Steinberger, the director of innovation diplomacy at Sunc, is defiantly upbeat about Israel’s prospects. “Fifteen per cent of the tech sector has been or is in reserve duty. From CEOs to CTOs and CIOs and all the way down. And so the impact is felt, but it hasn’t put the tech sector on hold in any way.
“All the companies have evolved and adapted and we’ve even seen this very practically. A CTO will be literally in the field on reserve duty and he’s texting the team about a strategy or an interview.” It helps that this experience isn’t new. Many of the companies Sunc works with have employees in Ukraine, and are used to working around the busy schedules of soldiers on front lines.
Another factor helping Israeli tech is the location. While most of Israel came under fire in the days after October 7, the tech sector is based largely in the centre of the country around Tel Aviv – far away from all but a few of Hamas’s rockets and somewhere that has been relatively calm since the war started. This security has allowed businesses to continue functioning, especially those that sell goods and services outside Israel, where demand remains strong.
Facilitating diplomatic ties through business is key to Sunc’s mission. In a post-Abraham Accords world, where more and more traditionally hostile countries are seeing the value of Israel as an investment, they’ve found that selling innovative Israeli tech is the best way to build bonds.
When asked if there’s been reticence to engage with Israel from Arab countries since the war, Steinberger said: “We continue to engage. There are relationships happening. There’s a lot of business engagement happening. It’s just below the radar.
“It requires more effort for fewer headlines. But now we’re not after headlines. We’re after laying the groundwork for real business collaboration to take hold.”
There seems to be a natural opportunity to match up some of Israel’s historic enemies with tech that could fundamentally change their countries for the better.
Steinberger is convinced that selling these technologies will only boost Israel’s position in the Middle East and help resolve conflicts with its neighbours. “Water security, food security, agritech, renewable energy, these are issues that technology is critical for being able to resolve them. As citizens of the region, we’re just as susceptible and vulnerable to those challenges.”