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Opinion

Covid-19 Does not Have to Mean an Untimely Demise for Young Israeli Startups

If Israel wants its growth engine back on track, it is going to have to be far more creative and generous

Meir Orbach 17:4602.06.20
Days after the Israel Innovation Authority (IIA) and tech and life sciences umbrella organization Israel Advanced Technologies Industries (IATI) published a survey indicating a dire future for many companies, the Israeli tech industry is divided on one key issue: should young companies that employ only a handful of people and fail to raise funding on their own get a government lifeline or should they be allowed to perish.

 

The survey was conducted among 414 Israeli tech companies, most of which employ under 50 people, in mid-May, 2020, while the coronavirus (Covid-19) crisis continued to rage. Of the companies questioned that employ more than 10 people, 65% said they would be forced to shut down within six months unless they can secure new funding, with dozens giving themselves as little as three months.

 

Tech workers. Photo: Shutterstock Tech workers. Photo: Shutterstock
Some investors in the industry are claiming that many companies shut down regardless of a specific crisis and that success in the sector is a lot about luck and not just about capabilities and skills. These investors also say that when a company shuts down it releases quality employees into the local talent-crunched pool of tech workers.

 

Others believe the state should work to save as many companies as possible since the current turmoil is extraordinary and governments around the world are taking a stand to help any struggling industry, including tech.

 

The best practice, in this case, is, as always, somewhere in the middle.

 

Even during these trying times, the tech industry is still flush with cash. Many investment funds managed to secure a fortune in commitments before the crisis and are looking for an opportunity to invest outside their existing portfolios.

 

According to the report, however, most of them are just browsing, at the moment, holding off until things clear up. The problem is that many young companies do not have time to wait, so they are still hoping for the not so grandiose option of government support to provide a bridge until the time when it will be easier to raise funds.

 

It is worth mentioning that the Israeli government is offering very little to an industry it often dubs as its main growth engine. As such, tech deserves a lot more than the NIS 500 million (approximately $143 million) it is willing to offer small companies. The tech sector may not be asking for much more, at the moment, but if Israel wants its engine back on track, it is going to have to be far more creative and generous.Coronavirus