Startup Exodus: Israeli Businesses on the Move Following Planned Judicial Changes

Nearly 70% of Israeli startups have initiated actions to shift portions of their businesses outside of Israel, according to a survey released Sunday by Start-Up Nation Central. The Israeli nonprofit organization’s study aimed to gauge the economic ramifications of plans by Prime Minister Binyamin Netanyahu’s coalition government to limit the Supreme Court’s power to overturn legislation.

This proposed judicial overhaul has sparked widespread protests over several months, with demonstrators arguing that it undermines Israeli democracy by eliminating a crucial counterbalance to executive power. The business sector has mirrored these concerns, attributing a drastic 70% plunge in tech fundraising in the first half of the year to the planned changes.

Israel’s tech sector, contributing 15% of economic output, 10% of jobs, over 50% of exports, and 25% of tax income, has been fueled predominantly by venture capital funds, with limited participation from institutional investors.

Among the 521 companies participating in the survey, 68% have started to take legal and financial measures, including withdrawing cash reserves, relocating headquarters, and conducting layoffs. Additionally, 22% of companies have diversified cash reserves abroad, and 37% of investors reported that companies in their portfolios have moved some cash reserves overseas.

Avi Hasson, CEO of Start-Up Nation Central, warned that trends like registering or launching new startups outside Israel could be challenging to reverse.