"Over the past decade, in every corridor I have walked along around the world, at investors and large private and public companies, I have felt great. Not foreign. Perhaps even better than average just as if you are a unicorn. A strange creature that knows how to create something out of nothing, and who everyone applauds. But relationships are measured in moments of crisis and over the past year, I've been imagining that I'm walking along a dark corridor, and suddenly there's an abyss," ironSource cofounder Tomer Bar-Zeev, today president of gaming giant Unity, said. Bar-Zeev currently lives in Silicon Valley and serves as the president of a US company headquartered in San Francisco.
"The sentiment in the places I hang out in is not that positive," Bar-Zeev told a special panel session on high-tech led by Facebook Israel general manager Adi Soffer Teeni at the Globes Israel Business Conference. On the panel were other senior Israeli tech figures who are partners in Brothers and Sisters for Israel Civil Emergency HQ, an organization that was formed even before October 7, to spearhead the high-tech protest against the judicial reform.
Bar-Zeev said, "This is a war, but there are also political challenges, and we need to understand that and investigate it going forward. In most public international companies there are minority groups with official representation. They receive budgets from the management to promote agendas, and today Israel and Judaism are not defined as minorities in companies. We have never felt like a minority in the past, but you reach a point where public companies have to decide in favor of whom they donate and which narrative is promoted both internally and externally - which ultimately permeates Silicon Valley, a place where there is quite a bit of progressiveness."
"An inconceivable reality
Soffer Teeni said, "We are coping with the biggest crisis in the history of the state, together with a wave of antisemitism that is flooding the world. This is an inconceivable reality. However, we must understand that high-tech is a critical route in the ability of the state to get out of the crisis, and so with all the difficult events around us we must ask ourselves how to continue forward.
"54% of Israeli exports are from high-tech as well as 18% of GDP and 12% of employees in the economy are employed in this industry. But the most important number that we must keep is 34% of income tax that originates from the tech industry, which emphasizes its importance for the resilience of Israel's economy, except that now it is in a war that creates new challenges."
Serial investor Gigi Levy-Weiss, founding partner in NFX, which specializes in investing in early stage tech companies, expressed concerned about the low number of new startups being founded in Israel, among other things because of the war and because of the political crisis that preceded it. "The number of new tech companies founded here this year is 400 companies, a low-point we have not seen since 2003," said Levy-Weiss. "That's a low-point that we have not seen for 20 years in Israel and the number has been heading for zero even more so since October 7th. As a partner in a fund active in the US, I see the opposite trend there, where it is generally on the rise."
"A pivotal year"
"The political and security crisis is very unique to us, but had it taken place in a situation where the world economy was also in decline, it would have produced an easier feeling. But the reality is different," Levy-Weiss continued. "Some time at the beginning of the year, due to the Generative AI revolution, a new wave of innovation began in the world that made it possible for entrepreneurs in other countries to found companies and quickly connect them to the AI cloud.
"This makes 2023 a 'pivotal' year, a turning point year, in which we see a global increase in investments in new companies and new money being raised in funds but at the time of this global increase, we are declining. We need to win the war, but a second after that happens, we need to close the gap with the rest of the world, because we 'chose' a very bad year for these two crises that have passed over us since the beginning of the year."
A feeling of a huge crisis"
Viola Ventures founder and general partner Shlomo Dovrat said, "If in the past the declines in Israeli tech figures were close to those of the US, in January of this year Israel essentially disconnected from the world economy. The pace of investments in the US began to rise, and in Israel the judicial reform and October 7 have diverted it elsewhere.
"In an article published in the past by economists Zvi Eckstein and Dani Tzidon on Israel's economy after the second intifada, Israel in those years experienced a very large crisis due to two main factors: personal insecurity and lack of trust in the country. So, in the early 2000s, we saw a large decline in investments and emigration of young people who lost faith in the country and its ability to secure their future.
"We also see a similar effect to October 7. There is a feeling of a huge crisis that is reflected in trust in the state and personal security. If the war does not end with the restoration of personal security and the restoration of trust in the state, we will not be able to rehabilitate the economy."
The industry has mobilized to help
Fiverr cofounder and CEO Micah Kaufman spoke about the assistance given by tech companies to the residents of the Gaza border following the outbreak of the war and the activities of Brothers and Sisters for Israel Civil Emergency HQ, set up by the large tech companies to help find those who were missing, provide logistical help for evacuees and supply equipment for soldiers.
Kaufman recalled, "On October Windward CEO Ami Daniel himself set up a WhatsApp group to rescue those trapped with a spreadsheet that included phone number of military units, to prevent the recurrence of a situation where there are citizens who needed rescue and did not receive it. Within 48 hours tech companies, entrepreneurs and investors mobilized on behalf of the venture and people came from companies like Wix, monday.com, and Nexar and a complete and functioning tech product was set up called 'Already Coming' - a digital distress button connected to the entire army and responsible for rescuing hundreds of people, some of them by activists from Brothers and Sisters in Arms.
"This ability to put all the bureaucracy aside and build technological products that used to take 4-5 years, to set them up in just a few days and transfer them to the security, search and rescue services is unprecedented. There will be more books written about how the private sector has become involved in national missions."
"For years I lived with the feeling that if I do army reserve duty and create tens of thousands of jobs and donate to non-profit organizations, then this is my Zionism," Levy-Weiss said. "But since the beginning of the year, I and many like me feel that it is not enough. That we want to bring about a situation where the state works better, that its infrastructure works as it should, and bringing people together, not with dividing them.
"On October 7, I saw how the industry, which previously was convenient to accuse of preoccupation with exits and fundraising, rallied to help. From isolated people who joined the WhatsApp groups of the 'Civilian HQ', the numbers rose to tens, hundreds and even tens of thousands of people a day during the peak days in these groups. This upheaval revealed how mature the Israel's tech industry is."
"High-tech is here to stay"
"There were those who charged that high-tech didn't care about anything other than itself, and that was always nonsense," said Wix president and VP operations Nir Zohar. "Perhaps when companies are small and loss making and relying on investors' capital, they find it difficult to look outside and contribute to society, but the last few years have proven that the situation has changed in Israel. If in my company about 1,000 people are directly affected by the situation in Gaza, or are performing army reserve duty, the situation has changed. And if someone calls me from a number that I do not know and introduces herself as Shira from 'Brothers in Arms', asks me if I have a free bus to donate to her, and I do so on the spot, we are in a different place..
"There were employees here who simply got up and did things. They didn't ask questions, and we didn't bother them, and we even supported them. All of this makes me optimistic. It means that high-tech is here to stay, and if we managed to overcome all the difficulties and madness of the last few years, and if Israeli high-tech's entrepreneurial CEOs didn't get on a plane and fly off, then probably we're not going anywhere."
"There are people who have paid inconceivable prices in this war," added Zohar. "Probably we needed this, unfortunately, in order to change. A social, political change, to deal with what is important to build, to go to the periphery, to advance education 20 levels ahead, to build mechanisms that will permeate throughout public service."
Published by Globes, Israel business news - en.globes.co.il - on December 19, 2023.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.