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Workforce Shortages, Investor Reluctance: How Israeli Entrepreneurs Look to Navigate Businesses amid Conflict

The devastating attack that hit Israel last weekend has its consequences for many segments of its society - and the country’s tech and startup community is no exception.
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The devastating and surprising attack that hit Israel last weekend has its consequences for many segments of its society – and the country’s tech and startup community is no exception. As a nation known for its innovation and technological prowess, Israel’s industrious tech sector has long been a global leader, with the country a home to more than 6,000 startups and close to 100 unicorns. In 2022, the city of Tel Aviv alone had 30 new unicorns and 20 scale-ups on the stock market. 

However, the recent attacks carried out on Israel by the terrorist organization Hamas also threaten  to cast a shadow of uncertainty over the future of the ecosystem and to temporarily halt its development. 

The conflict has already resulted in the loss of thousands of lives, and as it further unfolds The Recursive reached out to voices from within the industry to shed light on the challenges that Israeli startups and businesses face right now. 

While emergency situations are not unfamiliar to Israel, the ongoing conflict might cause a reluctance among some companies and investors to work in war zones, seasoned Israeli entrepreneur and patent expert Yehuda Binder explains.

Most high tech companies continue to work, but people work from home or shelters. Probably the only impact is companies and investors that are reluctant to invest or work in war zones. This is the reason why many startups have offices in the US or other places out of Israel,” he tells The Recursive. 

Military service and mobilization as main challenges 

For Udi Alroy, co-founder and CEO of foodtech startup CarobWay, maintaining business operations amidst the crisis is one of the most important challenges right now. 

Despite 30% of their workforce being called up for military service, the company has managed to continue functioning. 

“The primary challenge we face is ensuring an adequate workforce for daily operations, and we are grateful for the commitment of the volunteers who have joined us in this effort. Despite some disruptions, such as delayed or canceled flights, Israel is fully operational, and all deliveries are proceeding as planned,” Alroy tells The Recursive.

As he further points out, the availability of Israeli workforce is instrumental to having functional business operations at the moment.

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Our employees have demonstrated incredible strength, showing up to work and making themselves available around the clock. While some tasks are being carried out remotely to accommodate parents who need to stay with their children, overall, our operations remain functional,” he adds.

Entrepreneurs such as Kobi Avidan have been drafted to serve in the army. While this is a duty that every Israeli is looking to fulfill, when it comes to running a business there are other responsibilities that one needs to take care of.

“With some employees, including myself, called for duty in the army, we are facing temporary workforce shortages, demanding swift adjustments to manage responsibilities effectively during this challenging period,” Avidan, CEO and co-founder of nutritech startup Novella, tells The Recursive. 

Moreover, the company has also seen disruptions in essential activities, such as attending trade shows and meeting potential investors.

“Flights crucial for attending trade shows in the US and visiting potential customers and investors in Canada have been disrupted, affecting our ability to showcase our products and establish key partnerships. The temporary halt in activities with investors has introduced uncertainties in funding and strategic planning, necessitating agile responses to maintain stability,” Avidan explains.

The ecosystem needs to get ready for long-term impacts

For both Alroy and Avidan, in the long run, the conflict can cause a nuanced impact on the Israeli tech and startup ecosystem. 

“Historically, Israel has demonstrated resilience and a remarkable ability to rebound from adversity. As the situation stabilizes, we anticipate a renewed focus on strengthening the tech ecosystem. The challenges faced today may foster a spirit of innovation and collaboration as companies adapt to the new normal,” Avidan points out. 

However, the journey to stability might be a gradual one, as startups and their employees will need to navigate uncertainties and potential shifts in the investment landscape. 

“During times of conflict, navigating the challenges faced by startups becomes particularly demanding. Merely possessing proprietary technology or innovation is insufficient. It is imperative to foster a positive workplace environment, communicate your vision effectively to both employees and farmers, and ensure the security of their income,” Alroy adds.

Thus, aside from the expectations that this would be a long lasting conflict, there is also the hope that it would eventually result in some kind of a resolution that will bring much longer for peace in the Middle East region.

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“Our thoughts are with everyone affected by the conflict, and we fervently hope for a swift resolution and lasting peace,” Avidan concludes.


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Bojan is The Recursive’s Western Balkans Editor, covering tech, innovation, and business for more than a decade. He’s currently exploring blockchain, Industry 4.0, AI, and is always open to covering diverse and exciting topics in the Western Balkans countries. His work has been featured in global media outlets such as Foreign Policy, WSJ, ZDNet, and Balkan Insight.