One third of Israel's technology companies are planning to begin layoffs because of the coronavirus, and seven of them have already begun, according to a survey conducted yesterday by the Viola Ventures venture capital firm among 150 executives and human resources personnel. The survey is an update of one conducted by the fund last week. The new survey also indicates that two thirds of companies have frozen their hiring, far more than last week's survey, which reported that only 30% of companies had suspended their hiring or were planning to do so.
The companies' responses last week and in yesterday's survey show that half of the companies now working on a hiring freeze did not expect to be in this situation a week ago. The survey also indicates that the unexpected situation created by the virus will also have a substantial effect on the revenue of a large proportion of the companies. Last week, 45% of the companies said that they saw no real effect of the coronavirus on their business; this week, only 5% of the companies said that they had not been affected.
55% of the companies are still being cautious in their assessments, and believe that the virus's effect cannot be estimated accurately. 19%, however, answered that they would not fulfill their revenue guidance for the year as a whole, and 15% believe that they will fail to achieve their first and second quarter targets, compared with only 5% a week ago who said that the coronavirus would have a real effect on their business.
Most of the companies report that the virus will change their revenue models. 22% have already revised their revenue model, and 67% said that they were planning to revise it in the near future. The virus is also affecting companies' budgets, and 45% of the respondents in the survey reported cuts in their marketing budget, while a third were planning marketing budget cuts in the near future. Two thirds of the companies also reported that they were planning to freeze agreements with new suppliers, or had already done so.
Over the past two weeks, the shekel-dollar exchange rate has risen from NIS 3.44/$ on March 5 to NIS 3.74/$ at web posting. 60% of companies reported that they had taken advantage of the opportunity in recent days to buy shekels with dollars, and most of them did so at NIS 3.60/$. Startups receive investments and revenue in dollars, and spend in shekels, so Viola is encouraging these companies to buy shekels now, before the rise in the shekel-dollar exchange rate ends and the rate goes back down.
"The companies set their budgets at the beginning of the year, and assume what the shekel-dollar rate will be. In late December and early January, when most of the companies set their budgets, the rate was NIS 3.43/$. What is happening now, because of the virus, but also because of fall in oil prices and the fall in the price of the natural gas that Israel exports, is that the shekel-dollar exchange rate has risen to a level not seen for years," says Viola Ventures general partner Ronen Nir. "For companies that planned their budget at a specific price, it means that their shekel budget went up by 10% without their having done anything. They can now employ more workers with the same number of dollars."
Published by Globes, Israel business news - en.globes.co.il - on March 16, 2020
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