Israeli investments paused, Tech sector tested, yet confident in resilience

Israel is often lauded as the “Startup Nation” for its exceptional talent in fostering innovative technology startups. However, the recent escalation of conflict between Israel and Hamas, marked by an unprecedented attack that claimed over 1400 lives and resulted in numerous hostages, has posed a significant challenge to the tech sector. In an interview with BizNews, Israeli tech pioneer, Yadin Kaufmann said that the tech sector has been directly impacted by the ongoing crisis, with approximately 15% of the 360,000 reservists called into active duty coming from this industry. Furthermore, he noted that investments in and acquisitions of Israeli companies are currently on hold. But he said, the country functions, Israel is an extremely resilient country, it is not the end of the Israeli tech sector or Israeli economy and they would come back from it. On the continuance of a programme, he launched over the past 16 years to help Palestinians create a technology ecosystem, the tech entrepreneur said that the programme is on hold just as several companies were in the late stages of preparing offers for Palestinian interns. Despite his shock and horror about the Hamas attack, Kaufmann says he is hopeful that once the fighting is over the Israelis will find a way to continue working with Palestinians, but he thinks that is going to take a change in leadership, on both sides. – Linda van Tilburg

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Relevant timestamps from the interview

00:00 – Introductions
00:35 – On the feelings on the ground in Israel
02:01 – On the personal impact of the hamas attack on Israelis
03:27 – Is it an exaggeration to say that president Biden will be landing in hell
04:52 – On the Palestinian internship that he created
07:36 – On interns from the Gaza area
09:23 – On the world economic forum
11:36 – How have recent events affected his program
13:52 – How has the Israeli tech sector been affected as a whole
16:03 – How are large international deals being affected
19:20 – Conclusions

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Excerpts from the interview

The worst week in Israel 75 year history, everyone was affected

Things are not good here. I’d say it’s probably been the worst week in the 75-year history of Israel, which of course has known quite a few bad weeks. But certainly, in my time here and what you hear from everybody else, it’s been horrific. The events of October 7th, the large-scale massacre of civilians, men, women, children, babies, and elderly people that were at a music festival, has absolutely shaken the country and it’s going to take time to recover. Right now people are still busy helping those from the South, burying and identifying the dead. Trying to understand what happened and how it happened is important, but I don’t think you can make sense of it. The atrocities that we saw here were just unlike anything we’ve seen before.

Israel is a very small country. I mean, you might not know it given the amount of noise we make, but it’s a country of not even 10 million people and 1,300 people were killed in a single day here. Many more were injured, some seriously, and people were taken hostage. So, everyone has either lost someone in their family or is very close to someone who has lost friends or family. It’s a time of mourning and grief for the entire nation. People are attending funerals and condolence calls, and everyone knows someone who has been affected by this tragedy.

Israel has a standing army, but in extreme situations like this one, the country relies on its reserve force. The country has called up about 360,000 reserve soldiers to help with the situation. This means that almost everyone knows someone who is serving or has family members who are serving. Remarkably, many Israelis living abroad have returned to Israel to volunteer and serve their country.

Country is functioning despite the “psyche of hell”, international support sends a message

The country functions. It’s not as though things are burning up. I live in a suburb of Tel Aviv, and for several days now, we haven’t had to go into the bomb shelter or hear any sirens. But the psyche of people is hell. I think that’s as accurate a description as anything. We very much value the fact that President Biden came to Israel.

Chancellor Schultz of Germany was here, President Macron of France and Prime Minister Sunak from the UK are due to visit, and the President of Romania was here as well. Mayor Adams of New York made some incredibly supportive statements. These things are extremely important because Israel doesn’t always get the support that many of us feel it deserves, especially from the United States. Feeling that support is extremely heartwarming and important, strategically as well because it sends a message to other countries in the region who would wish Israel harm.

Programme to build a start-up sector in Palestinian will have to be put on hold

I’ve been working for many years to try to help the Palestinians build a startup sector in Palestine. I’m doing this because I’ve found some extremely talented people there who are ambitious, and who are looking to build things. I believe it’s very much in Israel’s interest as well. I think that when you have huge economic gaps or disparities between two people who live so close to one another, that’s very unhealthy. It’s very bad for the Palestinians to have poverty, to have unemployment, to be hopeless in many cases. But it’s also very bad for Israel when there are people right next door to us who are experiencing that because it helps create instability, not to mention the opportunity cost of the things we could be doing together.

So, that’s been what’s guided me and the things I’ve been trying to work on now for many years. I started a venture capital fund that invested in the first Palestinian startups and I started a non-profit called the Palestinian Internship Program, which brings young Palestinian university graduates. I’m talking from the West Bank, which is different from Gaza, which is of course where the problems have been in the last several weeks, maybe several years. But these are West Bank Palestinians. Many of them are anxious to create a better future and want to build something. They see what Israel has managed to do as a startup nation and they want to do something similar. So this internship program takes some of these terrific young people and gives them their first professional opportunity by bringing them to do internships at companies in Israel.

We’ve worked with hundreds of young Palestinians by now. More than a hundred have been placed at internships at companies ranging from Google, Cisco, and Intel, all of which are huge multinational companies that have significant operations in Israel. Many of them have also worked at Israeli startups and venture capital funds that have been willing to open their doors and hearts to bring in young Palestinians and help give them experience, skills, and networks. The idea is that they will take all of those back with them to the West Bank, to East Jerusalem, and help develop the economy there. It is in everyone’s interest.

We have had several people from Gaza participate in another program we set up called the mentorship program, which is done over Zoom. We’ve been able to work with Gazans and we’ve had several Gazans participate in the mentorship program over the years. This has helped give them ties to people who have business experience and can help them develop their businesses.

We also had an event recently where we had four young Gazans who had been in the mentorship program come to Herzliya in Israel and participate in that event. It was a great opportunity for them to network with people who could help them develop their businesses.

So it’s so distressing to see that is going to be on hold, for a while at least.

Optimism about finding a better way to live with Palestinians, but it will take a change of leaderships

First of all, there’s always hope. I’m optimistic, which is why I live here and why I’ve been in the venture capital business investing in startups. There’s always hope. I firmly believe that it’s imperative for all of us living here in the region that Israelis and Palestinians find a better way than we’ve had until now to live and work together. There’s tremendous potential, and otherwise, both people will suffer terribly.

I still very much believe that it’s in the interest of the Palestinians and the Israelis to reach an accommodation. A Palestinian state is one possible outcome, and I happen to think it’s the desirable one for both Israel and the Palestinians. However, this will take time, especially after the recent setback caused by the problems that have come from Gaza. Israelis may be more reluctant to pursue this line today and tomorrow. I also think this will require a change in leadership on both sides.

Breaking the Impasse is a group of Palestinian and Israeli business people who have come together to work towards finding an accommodation. We all understand how important it is to work together and find accommodation. It will require compromises on both sides. I’m optimistic that sane heads will prevail and that we can make that happen.

How the tech sector and investments in Israel have been affected by the war

Israelis are extremely resilient. We’ve lived through numerous wars, two intifadas, and many challenges. Israel is an extremely resilient country. We always said that missiles may be flying, but companies don’t have to miss any deadlines. The tech sector, which is mostly export-based, has managed to work through very difficult situations. However, today is different. 360,000 young people have been called into reserve duty, and it’s been said that about 15% of those are from the tech sector. So, a quick calculation shows that about 54,000 people are not working in their tech companies. Many others have to be at home to care for family members or friends who are grieving or for young children who are not in school now. So, the industry is being affected.

It wasn’t an easy time for the tech sector before all this happened, given the downturn in the tech economy, layoffs and so on. However, this is not the end of the Israeli tech sector or economy or Israel itself. We will come back from this and probably come back stronger. But right now in the very short term, Hamas terrorism is taking a toll and Israel is doing what it has to do. In the meantime, the Israeli economy and tech sector are being affected.

Investments and Acquisitions in Israel likely to be put on hold

In the immediate term, companies that were in the process of acquiring or investing in Israeli companies are likely to put those activities on hold. I don’t think they’re going to cancel them because they were very much in the interest of both sides. So ,I think they’ll likely be delayed. People have to come to see what they’re buying or investing in, and many people are not travelling here right now. So, in the short term, it will have an impact and delay deals, probably more with the Arab world than with other places.

However, the US and Europe have a much longer history of working together. People have seen that we’re able to withstand tragedy and crisis and still manage to preserve our assets and grow them once the fighting is over. So, I don’t think this will have a long-term impact. I’m very hopeful that relations with the Arab world will be sustained.

The Abraham Accords are new, and there were discussions about expanding them to include Saudi Arabia and other countries as well. I’m sure that will be difficult to do in the current environment. But, as soon as the fighting stops, everyone will be able to keep their eye on the long-term interests of all sides, which argues in favour of maintaining and expanding these kinds of peaceful business relationships.”

How South African Jews helped to build ‘Ra’anana Fontein’

It is sometimes referred to as Ra’anana Fontein because there are many, many South Africans, many Anglos here, and English is very freely spoken. Many South Africans helped to build the city. The city is about 101 years old, and South African immigrants have played a major role in the development of Ra’anana and continue to this day.