Exodus 2.0: Startup Nation's Relocation Options
Decades of confidence in Israel's high-octane hi-tech industry is being shaken. Some startup entrepreneurs are checking out nearby relocation options.
///Once upon a time/// give or take a few thousand years, Moses led the Jews out of slavery in Egypt. A generation later, freed also of their mental slavery, the new Israelites entered their Promised Land and lived unhappily ever after. This Exodus, from slavery to nationhood, is marked every year during the Passover seder which starts next week.
Several thousand years later, give or take, the fractious Israelites are on the brink of civil war. Sparked by a legislative Blitzkrieg on the independence of the country’s judiciary, deep-seated societal fissures have been exposed and hardened.
Now, a new generation of Israelites —young, mobile, ambitious, pampered, connected, skilled—are adding their own twist to the obligation to “feel as though you yourself were once a slave.”
Having completed their mandatory army service as pilots, navigators, Special Forces warriors, drone operators, state-sponsored hackers, intelligence analysts, and other high-stakes, hi-tech roles, they have led the resistance to the government’s radical judicial overhaul.
It was their threat not to show up for reserve duty in strategic units like the Air Force’s 69th Squadron (the 69th operates F-15I jets, like the ones that hit Syria’s nuclear reactor), Unit 8200 (Israel’s NSA), and Sayeret Matkal (Israel’s Delta Force) that most rattled the Netanyahu coalition, even more than the mass protests that shook Israel over 12 consecutive Saturday nights.
We’re talking about ~200,000 people, between the productive ages of 25 and 55. Now in civilian life, they’re tech founders, CEO’s, CTO’s, Heads of R&D, Data Scientists, Computer Vision Algorithm Team Leaders, Chief Product Officers, Software Architects, Senior Python Data Engineers. They are the backbone of Israel’s vaunted tech industry.
Over the past 20 years they, and the many foreign investors who have partnered with them, have built one of the world’s most important and exciting tech hubs. Israeli tech is inside key AWS and NVIDIA chips that power data centers and AI applications; Microsoft’s Azure cloud is protected by it; Apple’s new AI chips are designed in Herzliya, and so was Amazon’s drone delivery system; IBM’s AI team in Haifa is probably the only reason Big Blue is even still in the AI race.
In fact all of the World's Top 10 Tech Firms currently have very deep R&D work in Israel that is critical to their Corporate OKRs. There are some 530 multinationals from 35 countries working with Israeli techies, making Startup Nation one of the most globally connected tech hubs in the world.
It is no exaggeration to say that Israeli hi-tech is the engine of the country’s economy, making up 51% of exports, 20% of GDP, and a quarter of the government’s tax revenue.
It is, for all intents and purposes, a national treasure. Who wouldn’t want a tech industry like this? Why throw away such a treasure? This is why the anti-democratic push is so galling and dangerous.
This powerful tech ecosystem can only thrive in an open democracy that prizes education, national service, and a fail-often-and-fail-fast approach to risk-taking innovation.
If Netanyahu’s judicial coup passes —and I consider the current consultative pause just a pause before the resumption of hostilities — Israel’s techies will look around and see that they live in an a Auto-Theocracy that prizes religious education over STEM, mass exemptions for national service for everyone except them, and an isolationist, arrogant, and reactionary approach to risk-taking where you never learn from your failures.
To techies, this unfolding situation represents a complete change in the rules of the game, a brute-force install of an unacceptable Operating System.
They can’t serve this government in the army reserves and they won’t fund its operations with their taxes. They won’t be slaves to this system. So while they fight, they are also looking at the full range of their options.
And why shouldn’t they? As they see it, they’re now facing the choice of slowly boiling in a pot like frogs, or jumping out to become fast-growing unicorns.
Frogs v Unicorns, it’s as simple as that.
If you were a VC board member looking at your Israeli portfolio, what would you advise them to do? These are the kinds of questions investors are asking their Israeli partners:
Q: Will you have to apply to get money out of the country, like in South Africa? Could taxes shift and change on a whim?
A: Who knows, anything is possible now.
Q: Will you have government support to broaden the local talent pipeline so your companies can grow, in Israel?
A: Unlikely, as religious education gets more resources than STEM.
Q: Will you still attract foreign capital? Will foreign markets be open to Israeli companies?
A: Hard to say, but pension funds and other institutional investors will think twice about deploying capital into highly volatile countries without independent judiciaries.
I wish I could be optimistic, but there are enough open questions to merit serious considerations of a tech Exodus.
According to reports, Greek officials and Israeli entrepreneurs are in discussions about relocation proposals that include generous income, corporate, and profit tax reductions, expedited citizenship, and the establishment of communities, schools, and offices in sought-after neighborhoods.
If some techies do end up relocating, they won’t find the move too hard. Many of them have second passports from their grandparents or parents from places like Romania, Belgium, Poland, Portugal, Germany, Latvia, France, and others where they can work in the EU. And since the Abraham Accords, some might even relocate to Dubai and Abu Dhabi.
For some it will be their second or third “exits” —repeat entrepreneurs who previously sold their startups to US corporations and relocated, children in tow, to the Bay Area, Seattle, NYC, or Boston. When they moved back to Israel to start their new companies they never dreamed their country would turn into a religious, hard-right autocracy.
This next exit could be much closer to home—say 2-4 hours flight away — in places like Limassol, Lisbon, Athens, or Dubai.
For some new startup entrepreneurs it will be their first relocation. They travel lighter, married with perhaps 1 kid, a guitar, and a dog, there is no problem for them to move their early-stage tech companies, IP, and core coders to more friendly hubs.
It will be relatively easy. Everything will be taken care of. Chief People Officers will make the move seamless, just like ordering a Wolt meal delivery.
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///Alt Head (alternative headline)///
Who would have ever thought a headline like this would some day materialize:
Iran’s Nukes Save Israel’s Democracy
It’s from a big New York Times story Inside the U.S. Pressure Campaign Over Israel’s Judicial Overhaul in which US officials told Prime Minister Netanyahu that Israel’s image as the sole democracy in the Middle East was at stake.
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