Hundreds of high-tech entrepreneurs fear new Israeli government will undermine the ‘Start-Up Nation’

In a letter addressed to Prime Minister-designate Benjamin Netanyahu, more than 400 Israeli entrepreneurs and high-tech workers articulated their concern that the incoming religious-right-wing government’s planned policies would undermine Israel’s vaunted technology industry.

“We, entrepreneurs and founders of start-up companies in Israel, investors and managers of venture capital funds, appeal to you out of concern for the devastating consequences for the economy in general, and the high-tech industry in particular, that may result from the legislative processes taking place in the Knesset,” the letter to Netanyahu stated.

Critics in Israel and abroad fear that the incoming Netanyahu-led government intends to undermine the judiciary and implement far-reaching legal reforms that could weaken the rights of different segments of Israeli society.

The signatories stressed that while they respected the outcome of the recent Israeli elections, they simultaneously fear that sweeping legal reforms could harm the status of both individuals and companies in the Jewish state.

“As citizens, we respect the results of the last election that reflect the will of the people and believe that you, as prime minister, will act for the benefit of Israeli society,” the letter stated. “That being said, damage to the status of the judiciary and harm to the rights of minorities based on religion, race, gender or sexual identity – will be a real existential threat to the great high tech industry.”

The high-tech entrepreneurs stressed the importance of an independent judicial system for a healthy democracy.

“Undermining confidence in the Israeli judicial system and, as a result, in Israeli democracy, and legislation that puts a question mark on the basic and fundamental rights of every person, regardless of who they are, may deter the investors who have driven the growth of this great industry,” they said.

Eyal Waldman, one of the letter’s signatories and the founder of the American-Israeli company Mellanox Technologies, told The Times of Israel that the incoming government is making foreign investors nervous.

“I am hearing questions from investors from outside of Israel asking about what is happening in Israel,” Waldman said. “There are concerns about the proposed demands of the incoming government and their impact on parliament, the legal system and how the legal infrastructure will look.”

Mellanox specializes in developing high-speed servers and storage-switching solutions for data. In 2020, the U.S. computer enterprise NVIDIA bought Mellanox for $7 billion.

Erez Shachar, the letter’s main signatory and co-founder of Qumra Capital, warned that the Israeli tech sector’s future viability depends on strong relations with foreign investors.

“Israeli high-tech and, as a result, the Israeli economy, has an abundance of foreign investments. Investors from abroad knew that they were investing in a country that has one of the best legal systems in the Western world, a safe and democratic island in the Middle East,” Shachar stated.

The Israeli high-tech sector is widely considered the economic engine of Israel, which is known internationally as the Start-Up Nation. While the tech sector currently only employs approximately 10% of the total Israel workforce, it contributes around a quarter of the state’s total tax revenues.

Netanyahu, who recently authored his memoir, “Bibi my life,”, is widely credited for implementing economic reforms that enabled the development of Israel’s successful tech industry.

It is unclear, however, whether Netanyahu will be able to continue his former liberal economic policies while at the same time keeping his religious and far-right political partners satisfied.

For instance, Netanyahu reportedly agreed to transfer millions of dollars to ultra-Orthodox schools even if they do not teach core subjects, such as math, English and science. If this agreement is implemented, it could seriously undermine efforts to integrate young ultra-Orthodox into Israel's modern economy.