'Israeli start-ups that adjust their strategy will survive the economic crisis'

Is the bubble bursting? • “The Israeli high-tech market is mature and responsible”

MARKET DATA at the Tel Aviv Stock Exchange.  (photo credit: AMIR COHEN/REUTERS)
MARKET DATA at the Tel Aviv Stock Exchange.
(photo credit: AMIR COHEN/REUTERS)

"The current crisis is meeting a mature and responsible Israeli high-tech market, most of which has large cash reserves alongside strong management and a clear business model," explained Moran Chamsi, managing partner of Amplefields Investments, referring to the global economic crisis that has reached Israel.

Chamsi emphasized that 2020-2021 were record years for high-tech companies to raise capital. There were more than 800 investment deals, about 200 companies raised more than 50 million dollars, nearly 100 companies raised according to the value of a unicorn, and the total cash raised in 2021 exceeded the threshold of 25 billion dollars.

"Smart companies which raised a lot of capital in 2020-2021 and with the onset of this crisis knew how to develop and update the company's strategy in lowering expenses and finding additional revenue streams will survive the crisis in the best way and come out of it strengthened," he explained. 

"The money reserves they raised give them peace of mind, so they can concentrate on strategy and build up the company.” He continued by saying that now these companies don’t need to run around raising capital; instead, they can and should concentrate on building real value and empowering their company.

Chamsi referred to the claim that the high-tech valuations were inflated. "It’s difficult to ignore that many funds raised were at an unrealistic value. But precisely this situation, absurdly, became the biggest lifeline that the Israeli economy in general and Israeli high-tech, in particular, could ask for at this time," he added.

Israeli national flags flutter in front of an office tower at a business park housing high tech companies, at Ofer Park in Petah Tikva. (credit: RONEN ZVULUN / REUTERS)Israeli national flags flutter in front of an office tower at a business park housing high tech companies, at Ofer Park in Petah Tikva. (credit: RONEN ZVULUN / REUTERS)

Yet, he says that this current crisis is different from 2000. "Back then, hundreds of young start-up companies which were fumbling their way in the economic world in general and in the technology sector, in particular, found themselves at a dead end. Today the situation is completely different," he emphasized. 

"The same scars from that time are the veterans of the industry today. The mistakes of that time are no longer repeated wholesale. Also, in today's Israel a high-quality pool of entrepreneurs, investors and managers has matured and succeeded in building an industry here that is now responsible for the main part of the Israeli GDP."

Chamsi emphasizes that the high-tech industry won’t emerge unscathed from the crisis. "The crisis is already apparent in the Israeli high-tech industry," he says. He adds that in his opinion, the current crisis will detoxify the high-tech sector. Ineffective companies will close while others may hang on a few more years. But the high-tech sector will be harmed, there will be waves of layoffs that will only get worse, and those who didn’t save cash, operate efficiently now and build a clear path to profitability in the near future will find themselves in trouble."