Nearly three-quarters (72%) of Israeli investors believe that judicial reform will increase their portfolio companies’ layoffs, according to a survey released this week by Start-Up Nation Central.
Moreover, 31% of high-tech companies expressed concern about retaining talent.
The survey of more than 1,100 company CEOs and founders, investment firms’ managing directors and multinational corporation general managers was conducted to better understand the challenges of Israel’s high-tech sector during this time of turmoil.
The Israeli high-tech ecosystem is the economic engine of the Israeli economy, representing 16% of the country’s GDP and more than 7,300 companies, over 400 venture and investment funds and approximately 500 multinational corporations’ innovation and R&D centers.
Around 40,000 people are employed in the sector - 11% of the Israeli workforce - contributing 25% of total income tax.
Prof. Camil Fuchs, professor emeritus of Tel Aviv University, analyzed the survey.
The survey showed that almost a third (27%) of companies are considering relocating their employees outside Israel. It also found that 78% of investors and 42% of companies expect to change their portfolio companies or their own company’s headquarters jurisdiction.
In general, the high-tech community is deeply concerned about the ecosystem and the negative impact that the judicial overhaul legislation could have on their businesses.
Some 84% of investors and 80% of start-ups believe the judicial changes will harm them and their portfolio companies, including general business activity and customer access.
Specifically, 50% of start-ups believe the judicial legislation will result in difficulty acquiring customers abroad, and 63% of investors think it will hurt their portfolio companies’ ability to acquire customers.
There is an expectation that mergers and acquisitions will be drastically reduced, primarily from global sources, representing around 90% of ecosystem funding.
Similarly, 84% of investors said judicial reform could affect the ability to raise capital from abroad. Of them, nearly half (40%) said they would raise over 50% less than their last fund, and 51% believe they will raise 20% to 50% less.
Companies have an even more pessimistic outlook, with three-quarters (77%) saying they believe they will have difficulty raising capital from foreign investors.
The survey found that 79% of companies currently raising capital have already reported cancellations of meetings with investors since the judicial unrest began.
See here the full report by Start-Up Nation Central
This article was written in cooperation with Start-Up Nation Central