68% of Israeli startups taking legal and financial steps due to judicial overhaul

The judicial overhaul has led 68% of Israeli startup companies to take active legal and financial steps, like withdrawing cash reserves, changing headquarter location outside Israel, relocation of employees and conducting layoffs, a survey by Start-Up Nation Central has shown.

The follow-on survey of leaders of the Israeli tech ecosystem (founders and CEOs of startups and managing directors of VC funds) took place last week with the purpose of understanding the implications of the judicial reform legislation and civil unrest that has now plagued Israel for the last six months.

1 View gallery Protest against judicial overhaul. ( Photo: Getty Images )

According to the survey, 22% of companies report that they have diversified cash reserves outside Israel and 37% of investors say companies in their portfolios have withdrawn some of their cash reserves and moved them abroad.

8% of companies report that they have already begun the process of changing HQ locations, and 29% reported their intention to do so in the near future. 20% of investors note that companies in their portfolios have begun changing HQ location and 69% of investors noted that companies in their portfolios intend to do this in the future.

67% of investors are investing or are considering to invest in foreign companies – investments outside Israel are growing as a component in Israeli VC investment strategy.

65% of investors already see signs of recovery in the U.S. venture capital market or believe they will see them in the coming six months, compared with only 12% in Israel. The survey showed that there is significant lack of clarity regarding the expected horizon of recovery in Israel. 36% of investors say they cannot assess when a recovery will begin in Israel, compared to only 6% who said they cannot predict the same for the U.S.

“Companies and investors are taking active steps to move activity away from Israel and this behavior has increased significantly over the past three months,” said Start-Up Nation Central CEO Avi Hasson. “Concerning trends like registering a company abroad or launching new start-ups outside Israel will be hard to reverse. As an organization with a mission to strengthen the technology industry in Israel, it is our duty to share this data with decision makers in Israel and provide an up-to-date picture of the situation as it unfolds."