Startup guru Vardi warns ‘there will be no high-tech or foreign currency’

Yossi Vardi, a veteran tech entrepreneur and investor, warned Wednesday that the future of Israeli high tech is in danger and is facing a “terrible crisis.”

“High-tech does not exist in a vacuum, it is connected to the entire economy. Today we are at a crossroads,” Vardi said speaking on a panel at the Israel Democracy Institute. “We are facing a terrible crisis – the Israeli magic thanks to which we exist is beginning to fade.”

“There will be no high-tech and there will be no foreign currency, there will be no money for anything,” he cautioned.

Vardi, who over more than four decades has built numerous tech companies, urged decisionmakers to resolve the uncertainty around the proposed judicial overhaul to bring back investments and restore confidence in Israel’s ecosystem.

“The discourse on the future of high-tech is not political,” Vardi insisted. “Put aside the quarrels and toxic talk. If we find a logical way to conclude the current national debate, we have a bright future.”

Vardi, considered one of the founding fathers of the Israeli tech ecosystem, reminisced about the early days.

“We started from nothing, a group of people gathered in Israel time and time again, and managed to take a national challenge and crack it,” Vardi said. “Whether water plants, agriculture, weapons development or immigration absorption, all this happened thanks to one thing — people fought with each other but mobilized for the cause.”

Also at the IDI conference Alan Feld, co-founder of Vintage Fund, said that in the 29 years he has been doing business in Israel he has never been as worried about the future of Israeli tech as he is now. Vintage has $3.6 billion in assets under management and is invested in about 5,500 companies.

“The last few years have been incredible for Israeli high-tech. But when we look closer, the picture does not look so great,” said Feld. “The rate of startup initiatives, after reaching a record high of 1,400 companies a year in 2013, has diminished to 700 in 2021, back to the 2009 rate.”

In the first quarter of this year, Israeli tech companies raised $1.7 billion in capital, down 70% from the $5.8 billion in the first three months of 2022, according to a report by IVC Research Center and LeumiTech. The quarter marked the lowest figure in four years. Private investments in the local tech sector peaked in 2021 with investments of a staggering $26 billion, slumping to around $15 billion in 2022.

“This may be the worst year for fundraising since the 2008 economic crisis,” said Feld. “It’s true, there is a global crisis, but the decline in Israel is sharper than the one in the US.”