A recent survey conducted by Start-Up Nation Central, a non-profit organization, revealed that nearly 70% of Israeli startups have initiated actions to relocate parts of their business outside of

Israel. The survey aimed to assess the economic impact of the Israeli government's proposed judicial overhaul, which seeks to curtail the powers of the Supreme Court to strike down legislation.

The proposed changes have been met with widespread opposition, with mass street protests expressing concerns that they could undermine Israeli democracy by weakening the check on executive power. Additionally, business groups have cited the potential reforms as a contributing factor to a significant drop in tech fundraising, which has seen a 70% decline in the first half of the year.

Israel's tech sector is a major driver of economic growth, contributing 15% to the country's economic output, accounting for 10% of jobs, over 50% of exports, and 25% of tax income. However, the success of the tech industry has been largely reliant on venture capital funds, with institutional investors playing a minor role in the sector.

The survey, based on responses from professionals representing 521 companies, found that 68% of Israeli startup companies have already taken active legal and financial measures to adjust to the potential changes. These steps include withdrawing cash reserves, relocating their headquarters outside of Israel, moving employees, and conducting layoffs. Additionally, 22% of the companies have diversified their cash reserves outside of Israel, while 37% of investors reported that companies in their portfolios have already withdrawn some of their cash reserves and moved them abroad.

Start-Up Nation Central CEO Avi Hasson expressed concern that certain trends, such as registering a company abroad or launching new startups outside of Israel, might be challenging to reverse. The ongoing debate among lawmakers over a bill to prevent the Supreme Court from quashing legislation based on manifest "unreasonableness" has added further uncertainty to the situation.

The potential relocation of Israeli startups could have significant implications for the country's tech sector and overall economy. As the debate on the judicial overhaul continues, businesses are closely monitoring the developments and making strategic decisions to adapt to the changing landscape. The ultimate outcome of the proposed changes and their impact on Israel's startup ecosystem remain uncertain, and stakeholders are closely following the situation as it unfolds. Photo by israeltourism, Wikimedia commons.