Israeli tech sector resilient but faces funding uncertainty amid war with Hamas By Reuters

By Steven Scheer

JERUSALEM (Reuters) – Israel’s technology sector has remained resilient during a year-long war with the Palestinian Islamist group Hamas, but as it relies on big companies and foreign investment, the sector faces funding uncertainty that could hurt the economy generally showed a government report. Monday.

Since the war began on October 7, Israeli tech firms have raised about $9 billion – third behind Silicon Valley and New York, according to the state-funded Israel Innovation Authority (IIA).

“The level of investment was almost the same as in the same period before the war,” IIA CEO Dror Bin told Reuters. “So despite the fact that the risk has increased for investing in Israel, they still see the potential of those startups and continue to invest in them.”

High-tech drives Israel’s economy and accounts for 16% of employment, more than half of Israel’s exports, a third of its income taxes and 20% of its total economic output.

Bin expressed concern that employment in the sector has remained stagnant, which could reduce income tax when the state needs funds to finance the war.

At the same time, most investments are in mature startups and cybersecurity firms, while other areas suffer. “We’re looking at something that could evolve to be a problem,” Bin said, adding that many good companies that should be funded are currently struggling.

To that end, the IIA has a number of programs to help smaller startups stay afloat.

The war, Bin said, aims to create a “baby boom” of new defense technology startups once it ends.

“The fundamentals of the technology sector are the same as before the war,” he said. “Once this war is over, we will see a comeback.”

The IIA report follows a report in early September by the nonprofit Startup Nation Central (SNC), which said larger tech firms continued to thrive but warned about the sector’s sustainability due to protracted conflict and the economic policy of to the current Israeli government “which is broad. perceived as destructive”.

Israeli media reported this week that the 2025 budget will reduce tax incentives for foreign technology investors.