War strains Israeli tech: 71% of startups report fundraising hit
New survey finds widespread staff absences, delayed launches and growing concern over prolonged conflict.
A survey by the Israel Innovation Authority indicates growing damage to the resilience of Israel’s high-tech sector. Conducted in the third week of fighting among 637 high-tech companies, the survey found that nearly half are experiencing widespread staff absences, 71% report disruptions to capital raising, and 42% report significant delays in development. Most respondents are startups or growth-stage companies, with a notable representation of deep-tech firms.
Despite the situation, most companies are still avoiding drastic cutbacks, and only about 10% have furloughed employees to any extent. However, the impact on human resources is both widespread and significant: around 48% of companies report that more than a quarter of their employees are absent, due to a combination of reserve military service, lack of educational frameworks, and security restrictions. Only 11% of companies reported no absences at all.
Alongside workforce disruptions, companies are facing operational and global challenges. Approximately 75% report that restrictions on international flights are affecting their activities, while about 35% cite significant harm due to difficulties in holding business meetings, attending conferences, conducting sales, forming collaborations, and raising investment.
In production and supply, the picture also points to substantial disruption. Around 41% of respondents are manufacturing companies, and of these, about 76% report some level of disruption to production capacity. Approximately 24% report significant disruption, while about 6% have halted production entirely. At the same time, roughly 20% report significant delays in importing raw materials, and about 8% have stopped some supplies altogether, reflecting broader disruptions in global and local supply chains.
These operational disruptions are translating into delays in company activity, product development, and market entry. About 87% of companies report some level of delay in meeting development goals or launching products, with 42% indicating significant delays. In addition, around 67% have already postponed product launches or milestones, including 22% that report major postponements. The impact is particularly acute among smaller companies, where delay rates are higher.
One of the survey’s key findings is the impact on capital raising, a critical engine of high-tech growth. About 71% of companies report that the security situation has affected fundraising or investment processes. Around 37% experienced delays, 23% said investors postponed decisions, and 11% reported that funding processes were canceled altogether. The impact is more pronounced among smaller companies and those located in Israel’s north and south, where cancellation rates are higher than in the center.
Looking ahead, companies express growing concern about a prolonged conflict. Only 13% expect no change in activity if the situation continues. By contrast, 34% anticipate a slowdown, 22% expect to postpone projects, and 18% foresee reducing activity or headcount. About 12% of companies estimate that a prolonged security situation could lead to closure, a figure that is even higher among early-stage startups.
The survey also points to a potential structural shift: around 31% of companies report that they are considering relocating operations abroad, while another 9% considered doing so but ultimately decided against it. The data suggests a clear correlation between the severity of operational disruption and the likelihood of exploring relocation.
In a conversation with Calcalist, Dror Bin, CEO of the Israel Innovation Authority, said Israel’s tech sector has endured a difficult six-year period, yet 2025 remained a strong year overall.
“The factor with the greatest impact is the duration of the war,” he said. “If it ends soon, the effects will diminish; if it continues, the problem will worsen. The main issue today is the absence of workers, which is delaying work plans and product development. If the war ends tomorrow, companies won’t make extreme decisions, but they will if it continues.”
According to Bin, establishing a development center outside Israel remains complex for small startups. “If the war continues, companies will consider moving production overseas, not just software development.”
He also highlighted the impact of flight restrictions. “This is very problematic, for investors who cannot come here and for entrepreneurs who cannot travel to conferences. It also affects exports and imports for companies that rely on physical products.”
“If the war drags on,” he added, “we will work to raise capital to support companies, and we are already creating as much relief as possible for startups through investment funds.”
