Israeli Tech Leaders Warn of Exodus Amid Political Uncertainty

Top figures in Israel's high-tech industry are sounding alarms about potential losses of investments, companies, and skilled personnel due to political instability, damage to the country's international standing, and increasing competition for capital and technology. These concerns were central to the annual conference of venture capital funds, organized by the Israel Advanced Technology Industries (IATI), which brought together executives from approximately 200 investment firms operating in Israel.

Former Prime Minister Naftali Bennett emphasized the critical role of the tech sector, stating, "High-tech supports the country." He warned against the continued departure of companies and entrepreneurs from Israel, arguing that the primary challenge is not increasing direct government support but fostering a business environment that incentivizes entrepreneurs to establish their companies in Israel. Bennett proposed a plan to attract Israeli talent back from abroad and recruit Jewish professionals to Israel, alongside calls for reducing bureaucracy, improving regulatory certainty, and expanding STEM education in peripheral areas. However, he expressed reservations about the government's intention to use pension funds for high-tech investments, stressing that returns for savers should be the main consideration.

Avigdor Lieberman, Chairman of Yisrael Beiteinu, presented a more dire outlook, suggesting that if Israel does not change its policies, the U.S. could recognize a Palestinian state within two years and impose sanctions, severely impacting the tech industry. Lieberman specifically cautioned about potential sanctions on Israeli banks, explaining that the tech sector's ability to operate freely in international markets is crucial. He suggested encouraging institutional investment in Israeli startups through venture capital funds, backed by risk-sharing and guarantee mechanisms.

A key economic issue discussed was the need to reform the tax regime for entrepreneurs and investors. Karin Meir Rubinstein, CEO and President of IATI, revealed that the organization is advocating for a full capital gains tax exemption, similar to the U.S. QSBS model, to encourage company formation and operations in Israel. IATI is also working to mitigate the impact of a strengthening shekel on export companies' dollar revenues and to regulate international taxation under Pillar 2. Rubinstein stated that the next government must ensure Israel remains an attractive destination for capital, technology, and intellectual property to maintain economic growth.

The conference, held as part of EY's Journey 2026 conference, included representatives from prominent funds such as Aleph, Pitango, Viola, Blackstone, and NFX. Discussions also covered investment opportunities in artificial intelligence and the impact of technological revolutions on the future of Israeli high-tech.