The government’s disputed judicial overhaul proposal was cited as a major reason for the decline in investment in Israeli technology startups in the first half of 2023 by an Israeli tech sector watchdog.
Compared to the second half of 2022, the first half of 2023 saw a 29% decline in private funding for Israeli technology companies, as well as a sharp decline in investor engagement, according to Start-Up Nation Central, a nonprofit organization that monitors and engages with the country’s technology sector.
It added that mergers and acquisitions and initial public offerings both fell to a five-year low.
According to the organization, the uncertainty caused by the judicial reform “is already being felt in Israel with indicators such as decreased fundraising and fewer emerging Israeli startups.”
According to Yaniv Lotan, vice president of Start-Up Nation Central, there is an obvious connection between investor reluctance and the change in the legal system.
While technology investment in the United States and around the world has steadied in recent months, he claimed that over the same time period, “here in the Israeli high-tech market, we are experiencing a continued downward trend.”
Israel’s high-tech industry, which accounts for half of exports, is a significant economic driver for the nation. It has tens of thousands of workers, and in recent years, billions of dollars have been invested in its new businesses. Markets ultimately dislike uncertainty, according to Lotan.
A fundamental component of the government’s proposed judicial reform, the bill that weakens the Supreme Court’s scrutiny of governmental decisions, was passed by Prime Minister Benjamin Netanyahu and his allies a week prior to the publication of the report.