High-Tech Survey Reveals Israeli High-Tech Sector’s Resilience & Adaptation Amid Wartime Challenges
Despite capital shortages, workforce disruptions, and operational strains, 70% of companies anticipate sales growth and nearly half expect employment gains; but 80% say they’ll need to raise more capital within the next six months
The Israel Innovation Authority published today the findings of its third annual survey examining the state of high-tech companies in Israel since the outbreak of the war. Conducted in November 2024, the survey aimed to assess the war’s impact on the industry, the challenges faced by high-tech companies, and their coping mechanisms. For the first time, the survey also included high-tech companies that are not startups.
The survey reveals a mixed picture of resilience and challenge for Israel’s high-tech sector in the wake of the ongoing war. While 38% of companies expressed optimism about the future, nearly half reported implementing efficiency measures, including cost reductions and layoffs, to adapt to operational disruptions caused by prolonged military reserve duty, flight cancellations, and global investors’ caution. Alarmingly, 80% of companies indicated a need to raise capital within the next six months, with 43% identifying fundraising as their primary challenge. Despite these hurdles, 70% anticipate sales growth, and nearly half foresee employment growth in Israel and abroad, signaling cautious optimism and the industry’s ability to adapt under pressure.
Dror Bin, CEO of the Israel Innovation Authority: “The findings of this survey reflect the immense complexity faced by the Israeli high-tech industry during this period. We see companies struggling not only with capital raising and meeting development and sales targets but also with their very ability to operate in an environment deeply affected by the security situation, massive military reserve call-ups, and flight restrictions that complicate the management of global relationships. Nonetheless, it is precisely in these challenging times that the strength of Israeli high-tech becomes evident: rapid adaptation to a new reality, creative problem-solving, and a willingness to face unprecedented challenges. The entire ecosystem – government, investors, and companies – must come together to ensure the future of this industry, which is not only a critical growth engine but also a symbol of Israel’s innovation and leadership on the international stage. This is no time for compromises. We must seize this crisis as an opportunity to build stronger infrastructure, improve the business environment, and increase investment in growing companies to ensure that Israeli high-tech returns to rapid growth and prosperity.”
Key Survey Findings:
- The Main Challenge: Raising Capital – The primary challenge for high-tech companies is fundraising, particularly in light of the war and uncertainty. 43% of companies reported this as their main challenge in 2024.
- Short Runway – Approximately 50% of companies stated that their funds would be depleted within about six months if no new funding is raised.
- Immediate Need for Capital – About 80% of companies reported that they would need to raise capital within six months- a figure consistent with the previous two surveys.
- Impact on Development and Goals – According to the survey, 62% of high-tech companies largely or very largely agree that the security situation has led to failure to meet their development and/or sales targets.
- Impact of Military Reserve Duty – Around 30% of companies noted that the primary employment-related change due to the war is the effect of prolonged reserve duty on employees or their spouses. The impact is most significant for companies where a substantial portion of the team or their spouses were called up for duty:
- The main impact of reserve duty was operational delays and disruptions stemming from the absence of key personnel such as founders or individuals in critical roles.
- The larger the proportion of employees serving in reserves, the more significant the reported impact.
- Impact of Flight Cancellations – 74% of companies reported that flight cancellations hinder their ability to conduct business abroad.
- Business Resilience and Adaptations: High-tech companies demonstrate business resilience; however, nearly half reported making cuts, efficiency measures, and cost reductions, including workforce adjustments:
- Relocation of Activities or Workforce Abroad – 20% of companies reported relocating activities or staff abroad.
- Reduction of Cash Burn Rates – Approximately 40% of companies reported deliberately reducing their cash burn rates.
- Employment Changes – Compared to the previous survey cycle, more companies are attempting to recruit employees, although the time required to fill positions has slightly increased.
Expectations for the Future:
- Optimism – 38% of respondents are optimistic about the success of Israeli high-tech in the coming year. 70% of companies anticipate sales growth, and half expect an increase in employment in Israel.
- Employment Growth – About half of the respondents expect the number of employees in Israel to grow, and 45% anticipate growth abroad.
- Investor Behavior – 71% of respondents believe that foreign venture capital funds are behaving more conservatively due to the war in Israel.
- Down-Rounds – 38% of companies estimate that their valuation will drop in the upcoming funding round. This figure is similar to findings from previous survey cycles and historical data recorded before the war.
Adjustments Made by Companies
- Cost-Cutting and Efficiency Plans – Nearly half of the respondents have implemented cost-cutting and efficiency measures, including layoffs.
- Strategic and Business Changes – About one-third of companies have made changes to their business development plans and put projects on hold.
- Relocation of Activities Abroad – One in five companies reports moving certain activities out of Israel.
- Exploring New Funding Channels – Companies are turning to external entities for grants and support.
Potential Effects of Prolonged War:
Companies were asked about the possible impact of the war continuing for another year:
- Slowdowns and Closures – About one-fifth of respondents noted that prolonged war would have a significant impact on their company, including slowdowns and even closures.
- Investment Challenges – About one-fifth of respondents mentioned difficulties in raising capital due to the prolonged war.
- Relocation of Activities Abroad – Additional impacts include relocating certain activities abroad (e.g., sales teams) and challenges in maintaining business relationships with overseas clients.
The survey indicates that the Israeli high-tech industry is facing significant challenges amid the ongoing war, primarily related to capital raising and employment. Nevertheless, companies demonstrate business resilience and adaptability by adjusting and seeking solutions to navigate this period.
Creating a more stable business environment is crucial to allowing Israeli high-tech to continue grow and lead. Key factors impacting high-tech companies include reducing the number of reservists called up, reopening flight routes to and from Israel, and improving Israel’s global perception during this time
Methodology: the survey was conducted between November 6–27, 2024, targeting over 8,800 high-tech companies across all stages and fields of high-tech. A total of 664 responses were received, with more than 73% of respondents being company founders.