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Israeli Startups Seek Relocation Amidst Government’s Judicial Overhaul

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Nearly 70% of Israeli Startups Act to Relocate Parts of Their Business Abroad

A survey released on Sunday by Start-Up Nation Central, an Israeli non-profit organization, revealed that almost 70% of Israeli startups have taken action to relocate parts of their business outside Israel. This move comes in response to the government’s planned judicial overhaul, which has raised concerns about the restriction of the Supreme Court’s powers to strike down legislation.

Start-Up Nation Central Survey Assesses Economic Impact of Proposed Judicial Changes

Start-Up Nation Central conducted the survey to gauge the economic implications of the proposed changes by the hard-right coalition led by Prime Minister Benjamin Netanyahu. Critics argue that the planned judicial overhaul could pose a threat to Israeli democracy by removing a vital check on executive power. The ongoing mass street protests further emphasize the public’s concern over these plans.

Tech Fundraising in Israel Plummets 70% Amidst Uncertainty

The proposed changes to the judicial system have not only triggered a political uproar but have also had a significant impact on Israel’s tech sector. Business groups attribute a staggering 70% drop in tech fundraising during the first half of the year to the uncertainty caused by the impending judicial overhaul. This decline has raised alarm bells as the tech industry plays a crucial role in the country’s economy.

Israel’s Tech Sector: A Pillar of Economic Growth

Israel’s tech sector has been a vital driver of economic growth, accounting for 15% of the country’s economic output, generating 10% of all jobs, contributing to over 50% of exports, and providing 25% of tax income. Despite its success, the sector has largely relied on venture capital funds for investment, with institutional investors playing a smaller role.

Worrying Trends Emerge as Startups Take Preemptive Measures

The survey respondents, representing 521 companies, indicated that 68% of Israeli startups have initiated legal and financial actions to adapt to the potential changes. Measures include withdrawing cash reserves, relocating headquarters outside Israel, conducting employee layoffs, and initiating steps to register companies abroad or launch new startups outside the country. These precautionary steps may be challenging to reverse in the future.

Legislators Debate Bill to Limit Supreme Court’s Powers

As the survey findings shed light on the concerns within the business community, lawmakers have commenced debates on a bill designed to prevent the Supreme Court from nullifying legislation based on the grounds of “manifest unreasonableness.” The outcome of these deliberations will undoubtedly shape the future landscape of Israel’s judicial system and may further influence the decisions of startups regarding their operations within the country.


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