Israeli High-Tech Faces Financial Strain as Dollar Weakens Against Shekel

The recent sharp fluctuations in the US dollar exchange rate have significant macroeconomic implications for Israel's high-tech sector, which accounts for approximately 58% of the country's exports. Miah Eisen-Tzafrir, CEO of Leumit Tech, explains that the sector operates on a complex dual model: companies raise capital in dollars and earn revenue from global clients in dollars, but their main expenses, including salaries and development centers, are in shekels. When the dollar weakens, revenues and fundraising shrink in local currency terms, while shekel-based costs remain high or increase.

The dollar's drop from over 4 shekels at the outbreak of the war to a low of 2.88 shekels has forced companies to reassess budgets and operational plans. Firms with longer financial runway have more time to adjust spending and workforce planning, while those with shorter runway face more immediate challenges, as their funds now cover less time than initially planned. Entrepreneurs are increasingly cautious about hiring and fundraising timing, especially amid the transformative impact of AI technology, leading to more conservative and efficient development strategies.

Larger, established companies use sophisticated financial hedging tools and advisory services to manage currency risk, but startups often lack such capabilities. Instead, they focus on setting realistic, conservative budget exchange rates to ensure existing capital suffices to reach key milestones. The ecosystem, including banks and government bodies, is actively working to support startups by providing knowledge, financial certainty solutions, and considering aid funds and tax payment options in dollars.

Looking ahead, structural factors like Israel's current account surplus support a stronger shekel in the long term, with market expectations of the dollar stabilizing around 2 shekels. Despite the challenging macroeconomic environment, Eisen-Tzafrir remains optimistic about the resilience of Israeli high-tech, emphasizing the sector's global technological leadership and ongoing proactive adjustments by thousands of companies to navigate the crisis.