InterviewFiverr CEO: "We are witnessing the worst value destruction in Israel's history"
Fiverr CEO: "We are witnessing the worst value destruction in Israel's history"
"Can you even understand how it feels to know that in two months we have destroyed 30 years of work?” says Fiverr CEO Micha Kaufman
The Twitter account of Micha Kaufman, the co-founder and CEO of Israeli high-tech company Fiverr, was pretty mundane up until two months ago. He mainly tweeted in English, about new technologies, the world of freelancers in which Fiverr operates as a platform connecting them to companies, and the future of AI. But then in February, everything changed. Slowly but surely, Hebrew took over the account and the tweets no longer spoke about high-tech, but rather about the high-tech protests against the judicial overhaul.
When we started talking about this interview almost half a year ago, Kaufman was known as a reluctant interviewee. Now, as we meet at the end of one of the most tumultuous weeks Israel has ever known, with the firing of Defense Minister Yoav Gallant, and the subsequent seemingly suspended political upheaval, he can’t stop talking. He still speaks quietly, but beneath his characteristic calmness, he sometimes makes comments that most of his colleagues, those who lead other high-tech companies and have to be accountable to foreign investors, refrain from voicing aloud. This is ostensibly to avoid creating a sense of panic.
But Kaufman disagrees. "We don't need to create panic because we are already in a panic… because we are in a very serious crisis right now. The 'Israel' brand is being damaged," says Kaufman. "Even if everything stops now, the economic and reputational damage has already been done. What I am trying to do now is to prevent a terrible destruction of Israel’s economic value. Can you even understand how it feels to know that in two months we have destroyed 30 years [of work]?! It's a terrible feeling, it's the destruction of a way of life and of the Israeli miracle, and Israeli high-tech is no less of a miracle."
What will be the economic consequences of the events in Israel?
"The budget that the government is preparing these days is imaginary. It does not exist because the billions from high-tech will not come in. The share of high-tech is going to shrink.” For example, he says that the international companies that have over 400 R&D centers based in Israel will leave. “In an unstable environment they will not stay here, in a minute and a half they will close everything."
Apple, Meta, Amazon, and Google which have been operating in Israel for years and employ thousands of workers here, will close their offices here?
"Why not? The unstable economy frightens them. The justice system that doesn't provide certainty worries them, and a government that passes laws related to the justice system every Monday and Thursday can pass a law that forbids intellectual property from being taken out of Israel, and that scares them too. They will be gone in a minute. It's just like what happened with SVB [Silicon Valley Bank] - a brand that was built and succeeded for 40 years and was erased overnight. Israel is starting to make mistakes, and it's ruining the brand. It's like a company that starts producing defective products. Such companies do not survive. We are witnessing the worst value destruction in Israel's history."
But ultimately, regardless of ideology or the judicial system, these companies have a clear interest in Israel - our talent, our workers - and they want them no matter what.
"The real talent that they are really after is not all 400,000 high-tech workers, but a small group of 15,000-20,000 people who receive offers to relocate about three times a week. Abroad, they will receive the salary they earn here, only in dollars, plus an additional 20-30%. Multinational companies will not declare the withdrawal of money or the transfer of people. They will just do it. Within two or five years, they will stop expanding offices here and will move some of the workers abroad. Investors will do the same. They won't announce a decision to reduce their presence in Israel. They will just do it quietly. That is why the budget that the government is preparing is an illusion. How can you build a budget in such an uncertain environment? It's irresponsible."
Your concerns are very troubling. What will happen to the Israeli tech industry and the economy in general?
"This crisis occurred while the tech industry was already in a very bad situation. There's a decrease in investments because interest rates are high and investors have alternatives. In recent years, there has been a significant leap forward in the tech industry, and a generation of entrepreneurs has emerged who think about how to build giant companies, not just companies to make a little money and move on. During these years, the tech industry has been the most important spokesperson for the State of Israel abroad. When the initial alarm bells rang we assured investors that Israel would deal with this situation, but what's happening now is beyond our control. The claims that the tech industry is inventing panic is ridiculous, because any panic we create works against us, so why would we do that?"
Because it's easy for tech to move from one place to another and leave everyone else to deal with the crises.
"But who wants to move elsewhere? We have no interest in leaving Israel. When I founded Fiverr, and this is true for all Israeli tech companies, there was a lot of pressure on me to register the company abroad. I didn't do it for Zionist reasons. We want to create jobs here that ultimately benefit the tax system, and the tax returns to all residents."
And yet, you can move the company from here with the click of a button. And surely there are also many employees who are requesting relocation right now.
"That's true, but it's not so easy to move. It's not just a matter of mentality, but also a technical matter to flip things around and turn into an American company. It's always a complex process, even more so when you're a public company."
Have you considered doing it?
“Our commitment as a company, and again, especially as a public company whose majority of shareholders are not Israelis, is always to consider the good of the company. In an environment of economic uncertainty, our commitment as leaders of the company is to ensure that our money is in a safe place. What does that mean? It means that if there is currently an unstable economy in the UK due to Brexit, we withdraw the money from there. If there are currently riots in the United States and we feel that it could affect the economy, we withdraw money from there. We do the same with Israel. It's not a statement, not to create panic, but it is our responsibility.”
Did you withdraw money from England during Brexit?
"Of course. When there is a situation of uncertainty and instability, moves like these are expected of leaders. Imagine if the CEO of Fiverr or Wix were American. They wouldn't think twice, because it's a business decision. What if tomorrow the government decides that you can’t withdraw money because of concerns about bank stability?"
What's the real chance that will happen? After all, Finance Minister Bezalel Smotrich said ‘Trust me.’
"When people tell me to rely on them, I know we're in trouble. If everything is based on people you need to rely on and not on a stable environment, both regulatory and economic, I worry. These are not statements that have a place in democracy."
Kaufman made these remarks based on personal familiarity with the actors, after participating in several meetings with government ministers, including Smotrich, in recent months. After one of these meetings with a group of high-tech leaders, many left believing that Smotrich would block the laws regarding the judicial overhaul, which of course did not happen.
You are saying that damage has already been done, but no real judicial changes have occurred yet.
"How can you say nothing has happened?!" Kaufman loses his composure a bit and even lightly hits the table. "This government has put 140 laws on the table in two months. It's a mad dash. The story is not political, I say it from a personal standpoint as well."
Kaufman adds that "they like to say on the other side that our goal is to replace the government, but that's not true. Netanyahu and his government were elected democratically, and he is my prime minister and Smotrich is my finance minister," he emphasizes the word "my" in both cases and clarifies: "So they need to work for me too, not just for their base. They need to do what is good for the State of Israel, not just what is good for those who voted for a coalition that came together for different reasons to undermine democracy.
“This government made one big mistake - it woke up the bear and the bear won’t go back to sleep."
Who are you referring to when you say the ‘bear’?
"The high-tech industry and the quiet liberal public. These are the people I meet at protests." Kaufman doesn't mention this, but many protestors have seen him handing out free water bottles. "There's no [central] leadership, especially no political leadership for this protest movement. There were attempts to establish leadership, but they were prevented by [the public] and personally by me. I said that if a politician attempts to take credit for the protest, we'll disavow him."
How is your participation in the protests received by Fiverr employees who don't agree with your views? Did you use company money when you hung the giant sign on the Fiverr building on Kaplan Street in Tel Aviv or when Fiverr organized the signing of a huge Declaration of Independence at the entrance to the building?
"Israeli high-tech is very pluralistic, and the protest is not political. That's also what the sign says, 'Democracy is bigger than politics.' To our employees abroad, we try to convey calming messages, as well as to our investors. They're interested in what's happening here, just like we were very interested in the terrible war in Ukraine. When I think about it, in our annual risk report, the previous note we added was about the war in Ukraine, and now we've added a note about the situation in Israel. It's sad."
But the question is whether it really leaves room for pluralism, whether employees still feel comfortable expressing their opinions.
"I really hope that people feel comfortable saying their opinions because there is no reason not to feel comfortable. What makes us strong is pluralism - diversity is the power that produces non-stereotypical and non-formulaic thinking."
But it's not real diversity, as one of the justified criticisms of the tech industry is its homogeneity, or ‘privilege.’
"I'm not interested in what they say about the tech industry. In the end, when a candidate enters Fiverr, we don't care if they are Ashkenazi or Mizrahi. We don't care if they live in the periphery [of Israel] or in the center."
What percentage of Fiverr employees come from the periphery?
"Not enough, but we at Fiverr and other high-tech companies have been producing work plans with the periphery for over a decade to strengthen it, and with disadvantaged populations, to bring them into the high-tech circle. But this doesn’t happen quickly. It’s a process that takes 10-15 years, and that means starting with children in these communities from a young age. They must have access to a technological education so that eventually the tech industry will not account for 10% of the workforce, but 20 or 25% in 20 years. Today, in the periphery there aren’t enough skilled workers who can start working at Fiverr tomorrow, whether we like it or not. But high-tech also contributes a lot, both in philanthropic donations and in taxes. High-tech workers paid 36% of the country’s total taxes in 2022 and if we include payments for rent, legal, catering and cleaning, we would reach 50%."
Do you expect governments to invest more in education?
"If you want to stop talking about 'the second Israel', you need to deal with it. Where have you been for 20 years? High-tech is ready to participate in any program. More than that, the government manages the tech industry’s money and decides where to invest it."
Do you see how the high-tech industry over the years has been at least perceived as elitist and detached?
"I understand the talk about spoiled employees, and I also criticize [the extravagance]. But, in the end these are anecdotes. Israeli tech provides such conditions to their workers because it has to compete with American companies. But the high-tech industry carries the entire country and could do otherwise if we chose to."
These are exactly the statements that make the general public feel that you are arrogant.
"I’m not saying it in a condescending way - on the contrary: both [high-tech] and the pilots and everyone who is referred to as ‘the first Israel’ is in reality the second Israel. This is the Israel that volunteers and bears the greatest burden, pays the taxes, does philanthropy, helps Holocaust survivors and women and children at risk and also works to reduce the gaps in society. And we do so quietly. But we are not to blame for what successive governments have not done for 20 years."
Kaufman himself, by the way, does not fall into a stereotype of classic privilege. During his military service in the navy as deputy commander in an elite unit, his squadron appeared on the front pages of newspapers after eliminating a terrorist cell near Rosh Hanikra.
Is there still room for optimism despite the challenging picture that you describe? Do you have confidence in the negotiation process?
"My great anxiety today is not only from what is happening, but from the fact that I personally feel that the unwritten contract between the citizen and the state has been broken. That is why even this bear who volunteers, and pays [his taxes] and follows the law, woke up and said 'we won’t do it anymore, we want equality.' My hope is that maybe from this horrible rift a reality will emerge that will require the writing of a new contract, no matter if they call it a constitution or something else, but one that will reunite this nation. The problem is that right now I don't see anything close to that and nothing that goes in that direction. Each side just doubles down, and everyone thinks they're the victim in this story."
Kaufman says that divisions within Israeli society “are destroying us. My parents immigrated with nothing from Argentina to fight in the Six Day War. Where do I go from here? Who wants me? My feeling today is a feeling of devastation, but I have to be optimistic because if not, it means that in another 10 years we won't be here and that's an unimaginable thought. I can't even let it cross my mind."
How much do all the events of the last few months affect Fiverr itself?
"There are potential international investors who could buy shares of Fiverr but don’t. I also fear regarding finding talent in Israel because some are considering leaving. I fear the moment that I am told not to keep money here and reduce the number of employees in Israel. It may be that part of my fear is irrational, but when I’m told 'trust me' my fear jumps tenfold."
How do you explain that industry veterans like Gil Shwed from Check Point or Amnon Shashua from Mobileye haven’t voiced their opinions nor do they seem particularly bothered by the situation?
"I think this is a great question for them."
Briefly, during the peak of the Covid-19 pandemic, Fiverr was very close to reaching a value of $11 billion. Since then the stock has crashed and is currently trading at about a tenth of the value, but still over a billion dollars. Fiverr employs about 600 people in Israel, and another 400 abroad whose goal is to help match freelancers with companies that need their services. Fiverr belongs to the new generation of Israeli high-tech companies that work directly with end customers and their brand is well known around the world. Its main rival is American company Upwork which is traded at a similar value.
Is it difficult for you to look at the screen and see the drop in value?
"When the company was worth $11 billion, I convened the management, we raised a glass and said - look at the number and forget about it, it is not justified and we did not earn it. The market is crazy," says Kaufman. Fiverr is the fourth company he founded after founding medical device, internet and software startups. "I was around in 2000 and in 2008, so I don’t get overly excited, because every period like that ends. Fiverr today has three and a half times more revenue than when it was issued at a value of $650 million in 2019.”
But the economic slowdown and seemingly widespread layoffs are playing in your favor because more organizations are switching to freelancers.
"The effect is first on freelancers themselves, since there are many more due to layoffs. But companies, on the other hand, are in the phase of cutbacks. When we get to a more stable phase, companies will increase the activity with freelancers before bringing back permanent employees. So just as we were among the first to report a slowdown already a year ago, we will also be the first to emerge from the crisis, because most of our customers are small businesses, and they don't require two quarters to make decisions."
When will it happen?
"The market is currently in a kind of stabilization, which doesn't mean it can't go down further, of course. I don't think the recovery will be as fast as it was during Covid-19, but there could be a significant increase that will bring us back to high double-digit growth rates like we've had for a decade - 30-50% per year. But right now our working assumption is that the market will not improve at least until the end of the year."
Since you became a public company, there have been many extraordinary global events from Covid-19 to the judicial overhaul, which of course affect the value of the company. Do you regret going public?
"I really don't regret the IPO. It allowed employees to enjoy the company's success and it also made the company stronger and more disciplined. As a manager, it makes you more focused and pushes you to deal most of the time with the future and not the present. In ten years when evaluating Fiverr’s stock, the current drop will be a small blip on the graph. My thinking is about the company that will be here in 20-30 years and how to make it the biggest brand in the world for freelancers and the future of work. That's what keeps me busy, the rest will take care of itself."
Today, Fiverr has more than five million regular users who purchase services in 600 different categories. The number of categories has soared in recent months following the introduction of artificial intelligence into everyday life with the launch of ChatGPT.
Regarding to what extent this development threatens the work of freelancers, some whose services can now be performed by AI, Kaufman replies: "I have been following the field for almost a decade and without a doubt the technologies released at the beginning of the year were a revolutionary leap forward. I define myself as a techno-optimist because in the end, it's just technology and as amazing as it is, what matters is what people do with it.
"Even when Adobe released Photoshop, they thought it would be the end of the era for graphic designers. Then they realized that these are powerful tools, but to achieve good results you need to be a professional. ChatGPT is a bit like a bartender - he has the drinks and knows how to make them according to the recipe, but he doesn't understand flavors and doesn't know how to invent new things. Regarding Fiverr, certain categories may disappear, but already today 30 categories have been added including fact checkers for ChatGPT or prompt writers - people who know how to structure the questions correctly. New professions will emerge tomorrow that didn’t occur to us today."
Beyond new innovations and management of his company, Kaufman admits that the protests have taken over his life, as has happened to quite a few CEOs in recent months. "I think people don't understand how many people in high-tech today pay less attention to their daily work in an attempt to prevent a disaster.”