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‘Start Up Nation’ goes to war

Or Bokobza, the chief executive of residential software start-up Venn, has barely spoken to his colleagues for the last week.

As a reserve member of an elite combat unit in the Israeli military, he has been in the field since almost immediately after the Palestinian militant group Hamas launched a surprise attack on Israel on Saturday.

“I’m out focusing on the most important thing right now which is the safety of our country,” he told the Financial Times in a brief call. “[Colleagues] are telling me: ‘Don’t worry about it.’”

Bokobza, along with around 10 colleagues at his 90-strong company, are among the thousands of Israeli high-tech workers who have been drafted into the country’s mass mobilisation for war.

Israeli tech founders and investors estimated that as much as 10-15 per cent of their workforces are among the 360,000 reservists to be called up, representing a sudden and significant disruption for relatively small companies.

As Israel gears up for a possible ground offensive in Gaza, the self-styled “Start-up Nation” faces an unprecedented test.

Israeli reservists stand on an armoured personnel carrier at a military camp near Beer Sheva, Israel. They are among the 360,000 reservists to be called up © Abir Sultan/EPA-EFE/Shutterstock

A long war could hit the country’s thriving tech sector, a key driver of its economy which accounts for roughly 15 per cent of all jobs, according to the Israeli Innovation Authority. This workforce is spread across hundreds of start-ups and major offices for multinationals such as Intel and Microsoft.

Israel also attracts a high amount of tech investment from abroad. The country raised $5.5bn in total venture capital across 320 deals in 2023 despite a global industry slowdown, according to market researcher IVC. But investors who tend to crave stability may find it difficult to continue betting on the country amid a prolonged conflict.

“I assume if this continues for a few months, there could be some impact on productivity basically because of the rules of physics; you have fewer people,” said Amitai Ratzon, chief executive of cyber security group Pentera.

Dovi Frances, founding partner of venture firm Group 11, said that several of the top executives at his portfolio companies were currently in the reserves. But he was among the industry leaders who also said they were already adapting, with the prospect of war long being a fact of life in Israel.

Yevgeny Dibrov, chief executive of cyber security start-up Armis, has been forced to deal with the departure of 20 members of his staff.

Israel-Hamas war

The eight-year-old company, with 660 employees, quickly moved on to a crisis footing: shifting some operations while its remaining staff in Israel worked from home, and offering psychological support for employees following Hamas’s attack.

“We are able to adjust to this, that’s basically the reality,” Dibrov said. 

Employees “can work in the safety of their homes and they can stay close to shelters and safe rooms, so from that point of view I think that Covid really helped us prepare”, said Gili Raanan, the founder of venture capital group Cyberstarts.

Some executives pointed out that many Israeli start-ups have top executives and marketing and sales groups in the US. “Companies know how to create business continuity and they know how to work through these types of situations. That’s one of the strengths,” said Shmuel Chafets, chair of venture capital group Target Global.

In other cases, start-ups are turning their technological prowess to the war effort, with the country’s world-class cyber security sector emerging from its military and intelligence services.

Nadav Zafrir, a former commander of Israel’s elite signals intelligence unit 8200 and now managing partner at the Team8 venture group, said that his company is working on using various technologies such as data science to support the government in its efforts to locate Israeli hostages.

“Our innovation cycle hasn’t stopped, we are researching different areas,” said Zafrir. “All of them are incredibly relevant for this time.”

Larger technology companies are also carefully observing matters. Intel, among the biggest multinationals in Israel with 13,000 employees, said it was “closely monitoring the situation in Israel and taking steps to safeguard and support our workers.”

As of Thursday, more than 300 venture capital firms had signed a statement of support for Israel, noting the country “has been an enduring partner to the global innovation ecosystem, fostering groundbreaking technological advancements and start-up innovation”.

The statement was signed by some of the biggest groups in the US, including Bessemer Venture Partners, GGV Capital and Insight Partners, many of which have invested in Israeli companies over the years. Other firms, including Sequoia Capital and General Catalyst, have also announced donations.

Start-up executives emphasised that, whatever the impact on their companies, Israel’s war effort came first. Group 11’s Frances said his company was organising donations of money, food and equipment, flights back to Israel for reservists abroad, and even a 50,000-bag shipment of coffee to the frontline.

Venn’s Bokobza said he only has sporadic access to his phone, so when he checked recently he had more than 100 messages of support. “My only hope is our customers, our clients, our partners all around the world will know that we are here to stay,” he said.

Additional reporting from Richard Waters, George Hammond and Camilla Hodgson in San Francisco

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