Israel’s Tech Companies Are Fighting Netanyahu—or Leaving the Startup Nation | WIRED

Tech is responsible for more than half of all exports, and the country collects 50 billion shekels ($13.5 billion) a year from the sector.

Wiz is among those distancing itself from its home country. Israeli companies have long operated with one foot in Israel and the other in bigger markets, like the US, where they can access more funding and customers. Wiz’s cybersecurity business has always technically been US-based, with “Israeli roots,” cofounder and VP of product, Yinon Costica, told WIRED in June. Costica shuttles back and forth between New York and Tel Aviv, where the company has a 200-strong team.

But Wiz withdrew tens of millions of dollars from Israel in February, according to Reuters, and when the company raised $300 million that same month, its CEO said that none of the cash would be invested in Israel. “Given the uncertainty about the independence of institutions in Israel and following an acute risk assessment of the situation, we will keep funds in US banks,” the company’s cofounder, Assaf Rappaport, told the Times of Israel.

Some founders have been very outspoken in their criticism of the bill and the Netanyahu government. When Eynat Guez, CEO of the payroll business Papaya Global, launched the business back in 2016, she was proud to be a cofounder of an Israeli incorporated company. Would she make the same decision today? “100 percent no,” Guez says. “If I had the ability to change this decision, I would do that.”

In an open letter sent to investors on Monday, Guez wrote that Israel had been “hijacked by a group of fanatics” and that Netanyahu was willing to “sacrifice Israeli democracy” to secure his own political survival. “Following this political overhaul, Israeli entrepreneurs will set up entities abroad,” she added in the letter. “It’s simply too risky to expose investors to a shady judicial system, with no real oversight, in which they have no protection and no legal remedy.”

The company announced in January that it would move all of its money out of Israel, and Guez told WIRED that Papaya was no longer managing any investment funds in the country.

For Guez, the problem is that being incorporated in Israel leaves her intellectual property exposed to a government that now cannot be reined in by the courts. And she believes investors are already spooked. “We went from a place where investors and multinational VCs would arrive in Israel on a weekly basis,” she says. That has dramatically changed since January, when Prime Minister Benjamin Netanyahu unveiled his reforms. “I can count on less than 10 fingers the amount of investors that arrived in Israel this year,” Guez says.

Yesterday, Israel’s credit rating was lowered by Morgan Stanley and risk assessment firm Moody’s warned of a “significant risk” linked to political tensions. Thousands took part in demonstrations the night before, as police fired water cannons into the crowd. Military reservists threatened to not report for duty. The law is expected to face challenges, including from the very supreme court whose powers it is designed to curb—although the bill was passed as a “basic law,” a type of legislation that justices have never previously struck down.

While Israel waits for whatever happens next, protestors have pledged to fight on—with many tech workers among them. “All of us never believed that this moment would really arrive,” says Guez. “We need to adapt to the changing economy and changing facts.” For some that means helping lobby the government, for others it means making contingency plans. This is an existential battle for Israeli tech, with democracy—but also the sector’s talent and investor support—at stake.

“We must remain a liberal democracy in order to remain one of the most attractive places for young, talented individuals that have other options,” says Nadav Zafrir, cofounder and CEO of cybersecurity venture capital firm Team8. “We also need to be a part of the league of nations that are liberal democracies because those are our investors, predominantly Europe and the US.”