Preserving Israel’s high-tech ecosystem: A path to upholding democracy

Israel faces a pivotal moment in its democratic journey. With the specter of illiberal democracy looming, the very fabric of the nation stands at a critical crossroads.

Amid the largest and most sustained protests the country has ever seen, the local high-tech ecosystem has emerged as a key player. But while high-tech leaders have stood up against the erosion of the Supreme Court’s power, the hard-line Netanyahu government’s efforts to pass its anti-democratic legislation have wreaked havoc upon the sector, impacting the strength of the overall economy, weakening foreign investment, and endangering the very essence of Israel’s identity as the Startup Nation.

To safeguard democracy, we must recognize the crucial role played by Israel’s high-tech community in maintaining the nation’s pluralistic fabric and promoting critical thinking. At the core of this sector lies a dynamic blend of innovation, diversity, and openness, which have been pivotal in shaping Israel’s global technological success. The government is threatening to dampen this vibrant ecosystem; we won’t let them.

Amid the valiant efforts to oppose the government’s anti-democracy moves, there appears to be a certain reticence among pro-democracy tech leaders to make the argument for the future of the tech ecosystem as clear as the dire situation demands. But the situation is dire, and something must be done to prevent further deterioration.

It’s time to advocate for a strategic approach to financial investment in Israel’s high-tech ecosystem as a way to empower the pro-democracy movement and fortify the country’s democratic foundations. In short: Investing in Israel may be a way to help save its democracy.

Foreign investors, hearing the warnings of ratings agencies, have grown hesitant about putting money into Israel, impacting the flow of essential capital into the high-tech industry. Data published last month by venture capital firm Viola revealed that fundraising by Israeli tech firms in the first half of the year plummeted by 73% to $3.2 billion compared to the $12 billion raised during the same period in 2022. This marks the lowest figure since at least 2018.

Moreover, the June State of the High-Tech Industry in Israel 2023 report by the Israel Innovation Authority warned that the high-tech industry would be particularly impacted by weakened foreign investment, with most of its research and development (R&D) funded by foreign investors.

According to the report, domestic private sector financing covers only 40% of local R&D — the lowest rate among OECD (Organization for Economic Co-operation and Development) nations — exposing the industry to greater risks when alternative financing channels are limited. A downturn in foreign investment could therefore hit the tech industry especially hard, stifling innovation and the growth of startups, compromising the very engine that has fueled Israel’s high-tech achievements.

Yet, the repercussions of reduced foreign direct investment and the depreciation of the shekel extend far beyond the economy’s confines, potentially damaging the resilience of Israeli democracy even further.

The high-tech ecosystem plays a transformative role in promoting openness, inclusivity, and critical thinking — values vital for sustaining a vibrant democracy. As a hub for innovation, the sector attracts diverse talent, creating a melting pot of ideas that challenge traditional norms and biases. Embracing diversity within Israeli tech companies empowers individuals from various backgrounds to actively participate in shaping Israel’s future, cultivating an inclusive democracy that resonates with the nation’s pluralistic fabric.

A weakened high-tech ecosystem will lead to a drain of intelligent talent, as individuals may seek opportunities abroad, attracted by more stable and liberal environments. The departure of skilled minds from Israel undermines the nation’s capacity to address critical issues and implement forward-thinking policies. A thriving high-tech industry not only strengthens Israel’s economy but also acts as a magnet, retaining valuable talent within the country, bolstering the democratic ethos, and enriching its capacity for resilience.

Supporting Israel’s high-tech industry is therefore not just about bolstering the economy; it is about empowering the pro-democracy movement, enriching democratic engagement, and safeguarding the future of a nation that has long been a symbol of progress in the region. In essence, investing in Israel’s high-tech ecosystem brings together the realms of democracy and economic prosperity: Strengthening the high-tech sector directly nurtures democratic principles, while economic growth driven by innovation reinforces the very foundation of democracy.

By embracing the symbiotic relationship between democracy and economic progress, the imperative of investing in Israel’s high-tech ecosystem, while also protesting the anti-democratic legislation, becomes clear. Together, democracy and economic prosperity form the bedrock of a thriving and resilient nation ready to meet the challenges of tomorrow.

In the face of past challenges, history has shown that Israel’s high-tech ecosystem is not easily deterred. Throughout the nation’s journey, it has faced and triumphed over various challenges, emerging stronger and more resilient each time. While the anti-democratic efforts may cast shadows, the indomitable spirit of innovation, creativity, and democratic values that permeate the high-tech sector will undoubtedly outlive and outshine the darkness. We will overcome.

And so, investment in Israel’s high-tech sector is an investment in the preservation of its democracy — a democracy that stands strong, emboldened by the unwavering spirit of innovation that drives the heart of the Startup Nation.