How Israeli Start-Ups Are Shaping the Modern Battlefield in the Israel-Hamas Conflict
Israeli soldiers take position near the Israeli Gaza border, southern Israel, on Monday, Oct. 9, 2023. Photo: AP Photo/Oren Ziv
On Saturday, Oct. 7, Hamas carried out a surprise attack by firing around 5,000 rockets in an initial barrage toward southern and central Israel. The rocket attack was then followed by Hamas fighters crossing the barriers separating Gaza and Israel, leading to raids in the towns of Sderot and Ofakim.
The following Monday, Israel reported that around 700 people were killed, while thousands of civilians had been wounded. Israel launched Operation Iron Swords in response to the attack, attempting to employ as much military strength as possible to destroy Hamas’ capabilities. As of today, The Palestinian Health Ministry reported that “1,100 people [have] died as a result of Israeli retaliatory strikes on Gaza with some 5,339 injured.”
With attacks coming from both sides, Israel formally declared war on Sunday, which meant stopping electricity, food, and fuel supply to the Gaza Strip. As stated by the Prime Minister Benjamin Netanyahu of Israel, “This war will take time. It will be difficult.”
As the war continues to intensify, Israel’s business and technology sectors are experiencing severe disruptions. Over 360,000 reservists were called to join the war effort, forcing employees to leave their jobs. Avi Eyal, co-founder of global venture firm Entrée Capital, estimated that start-ups are seeing 10% to 30% of their workforce drafted in the war.
This has been particularly disadvantageous for Israel’s economy and its role as a “start-up nation.” The high-tech industry is one of Israel’s fastest growing sectors, accounting for 14% of jobs and one-fifth of Israel’s gross domestic product.
Prior to the war, Israel’s tech start-ups were already facing a rough year in funding due to the downfall of major lender Silicon Valley Bank, global recession trends, and rising borrowing rates. Given that many Israeli tech start-ups are incorporated in the United States, and are highly dependent on foreign investment, access to funding amidst instability will continue to be limited. The war has created a new obstacle for the start-up market, with major deals left unclosed and operations put to an indefinite hold.
Donation center with relief goods in Tel Aviv, Israel. Photo: CTech/Moti Kimchi
Amidst the uncertainty, some tech investors in the United States have pledged support for Israel by providing humanitarian aid. An American venture capital company, General Catalyst, has pledged an initial $250,000 to support humanitarian initiatives. Insight Partners, a New York-based venture capital fund, has committed to donating $1 million to Israeli organizations.
The Israel-Hamas War, like other conflicts, has led to negative impacts on the global economy, such as rising oil prices, further inflation, job insecurity, and the Israeli currency — the shekel — sinking to a seven-year low. The uncertainty from the war has discouraged global trade and investment, with people trying to avoid risk and investors flocking to safer securities. As the IMF chief economist Pierre-Olivier Gourinchas said, "The global economy is limping along, not sprinting."
Israeli start-ups are bound to face short-term and long-term impacts from the conflict, which will require them to restrategize and adapt to a new reality. With almost half of the start-up workforce involved in the war, Israeli start-ups may need to outsource their operations to maintain their ever-growing tech industry and mitigate short-term operational impacts. And with funding for start-ups at risk of becoming scarce, the future of Israel’s start-up nation remains unclear.