For bigger tech companies, Israel’s mass mobilization has proven a manageable hiccup in business as usual. For smaller ones, it can pose an existential challenge.
By Alex Konrad and Alexandra S. Levine, Forbes Staff
CEO Yael Meretyk Hanan woke up on Saturday morning in Tel Aviv to her husband receiving a phone call from his reserve officer in the Israeli Defense Force, warning him to get ready – he was about to be called to serve. She immediately texted her cofounder Ido Glanz, CTO of their 10-month-old fledgling startup, Pelles.ai. Glanz was already on the way to report for duty, he wrote back.
“You’ve heard the news, and you’ve seen it. There was no other option, not even hesitation. You just get your things, and you go,” Glanz said over the phone from his unit’s barracks on Thursday. “I honestly haven’t showered since that morning.”
For Hanan, the next steps were to say goodbye to her husband, then check with Glanz’s wife to make sure their family had support in place. By Sunday morning, she was meeting with Pelles.ai’s two other founders to run through scenarios for how to keep their business, which uses AI to generate better MEP (mechanical, electrical and plumbing) designs from architectural floor plans, in full operation without its technical lead, likely for weeks at least. To investors and business partners across the U.S. who have reached out, Hanan has shared this message: “We are extremely sad and heartbroken, but safe,” she said. “Israelis are known to bounce back quickly. We are charging ahead.”
Similar scenes have played out across the Israel tech ecosystem and, to some degree, in the U.S., where numerous Israel-founded startups have moved their headquarters or maintained offices. The mobilization, one of the largest in Israel’s history, has seen 300,000 reservists called to the front lines of war in the days following the brutal surprise attack on border towns in southern Israel in which Hamas terrorists killed at least 1,200 Israelis. Israel has responded with air strikes that have killed at least 1,799 Gazans, according to the Palestinian Ministry of Health in Gaza. On Friday, Israel’s military told Palestinians living in northern Gaza to evacuate to the south, implying a full-scale invasion was imminent.
Israel’s mandatory service and reserves system, coupled with the fact that high-tech staff represent 14% of the workforce, and nearly half of all its exports, means that the large-scale mobilization has had a disproportionate impact on the global startup scene. Venture capital funding for Israel startups last quarter grew 56%, to $1.4 billion, according to startup data tracker Crunchbase. By comparison, European startups received $16.4 billion, up 28%. On Thursday, hundreds of VC firms signed a public statement in support of Israel and its tech community.
A sampling of startup offices in the country by several local investors, including Avi Eyal of Entrée Capital and Yuval Ariav of Symbol, found that about 15% of local employees have been called up for reserve service, on average. At larger tech companies with more staff in similar roles and across more geographies, such call ups haven’t proven debilitating, local CEOs and investors said. But at smaller startups, even one absence can prove disruptive — and sometimes it can mean the end of the business.
“We don’t want anyone’s pity. We want people’s sympathy, their empathy and understanding.”
Stealth startup Folio, which was in alpha testing for its AI-powered software for helping creatives manage digital assets, finds itself on hold and out of cash. CEO Fay Goldstein is now in active service, while her cofounder’s time is consumed by looking after home-bound children, with Israeli schools closed, and family members in a community that saw neighbors taken hostage by Hamas terrorists.
Folio won’t be hitting the user targets they set for October; nor will it proceed to beta testing at month’s end as planned. But speaking on Thursday after spending the previous day in a kibbutz where people were massacred by Hamas, Goldstein said she found herself questioning the importance of the problem her startup was looking to solve in the face of such tragedy. (Not that she’s planning to give entrepreneurship up.)
“It’s so weird how in our real lives, we took things so seriously in a world that just wasn’t worried about life and death,” she said. “And now we’re surrounded by life and death decisions and it’s making me put things into perspective.
For Israel’s startup unicorns and public tech companies, recent work days have been unusual and emotional, but not enough to slow their businesses down much. Many companies took the day after Hamas’ first attacks, a Sunday when Israel starts its work week, off. But the next day, they began absorbing the absence of employees on leave to volunteer because they were personally affected, or called to military service — including many, but not all, leaders and engineers at cybersecurity companies packed with former Unit 8200 and intelligence forces veterans, noted Talon Cyber Security CEO Ofer Ben-Noon.
A temporary workforce reduction is easier to absorb, CEOs said, when local businesses have matured enough to have offices elsewhere, like London and New York. At Armis, an IoT security startup valued at $3.4 billion, CEO Yevgeny Dibrov noted that the roughly 15% of local staff called up represented 3% of his global workforce overall.
At Pentera, another cybersecurity startup valued at $1 billion, CEO Amitai Ratzon said that management, concerned that Israeli staff would try to put on stoic faces to their colleagues, warned the Israel office to be honest about when they might need help. Some of its about 30 employees on active duty now continue to take customer calls by their own insistence, he said; meanwhile, European and U.S. staff have filled in for Ratzon and other leaders at conferences in Dubai and Monaco in recent days.
Both Ratzon and Dibrov have stressed to customers that their service wouldn’t be affected by current events. “We don’t want anyone’s pity,” Ratzon said. “We want people’s sympathy, their empathy and understanding, but we don’t want any discounts when it comes to customer requirements, support tickets and things like that.”
“If you would have told me seven days ago that in seven days I’d be in this situation, I wouldn’t have believed it.”
Digital solutions provider WalkMe, which went public in 2021, is another company mostly staffed outside of Israel at this stage. WalkMe set up a control room to field requests from reservist staff and others, for everything from food to headlights, while employees volunteered to take colleague’s support tickets and coding tasks in a WhatsApp group of hundreds of employees, until a project manager took over such reassignments.
“I joked to the team two hours ago, if you were working like this in normal [times], the stock would be at $500,” CEO Dan Adika told Forbes on Wednesday. (WalkMe trades at about $9, implying a market cap of about $800 million.)
The bigger startup CEOs have compared notes and organized relief efforts together in private WhatsApp groups, added the investor Ariav, a former fintech cofounder who launched his fund, Symbol, in August. Many such WhatsApp groups had previously helped startup community leaders coordinate protests against the Netanyahu government’s attempts to overhaul Israel’s judicial system earlier this year, multiple participants noted.
“This is a group that’s been very politically involved in the last year or so,” said Ariav. “A lot of the means, the forums and technology that was used to coordinate people coming out in the hundreds of thousands every Saturday to demonstrate and talk about what was happening, has been repurposed to coordinate support at a very large scale now.”
Israeli tech workers at American-based companies are also returning home as part of the mobilization, and others are amassing support and supplies for those heading to the front lines. Tzvi, a New York-based cofounder of a web3 startup who asked to be identified by only his Hebrew first name for safety reasons, got called up not long after two of his Israel-based data engineers. With his unit’s blessing, he stayed in the U.S. for a few days to coordinate volunteer shipments of night-vision goggles, bulletproof vests and helmets, while his cofounder managed their startup.
“We have a network of local volunteers and plenty of former Israeli soldiers, a lot of them tech founders, who are leveraging their networks,” Tzvi said. “We’ve basically been meeting reservists at the airports and giving them duffel bags full of gear to distribute to their units when they hit the ground.”
“We are finding this tremendous ability of startups to maintain operations at the least, and some even do more than just maintain.”
New York-based L.K. works at a major tech company after more than a decade as a pilot and commander in the Israeli Air Force. (Forbes is also using only his initials, and not naming his company, due to a safety request.) Speaking by phone from Israel on Thursday, he said his employer let him go back to Israel last weekend—with an open return date—without questions.
“If you would have told me seven days ago that in seven days I’d be in this situation, I wouldn’t have believed it,” L.K. said. “It really rattled my world, and I’m so grateful for my peers, colleagues and executives and managers at my company that without any hesitations, or any friction, just told me, ‘Sure, go do what you’ve got to do.’” (He will, he noted, still need to formally file for military leave.)
More than 1,000 people, meanwhile, have signed up to volunteer for Israeli startups missing key employees, according to New York-based Zoe Burian, who previously worked at tech company SimilarWeb in Tel Aviv and set up the sign-up page this week with husband Michael Burian, an employee at a digital health startup. They plan to launch a more formal website next week; for now, interested startups can fill out an Airtable form.
The absence of called-up employees is most acutely felt at early-stage Israeli-founded startups like Pelles.ai, where even one person serving can mean operating without a CEO, chief technology officer or head of sales.
Some CEOs continue to talk business metrics and close software contracts while on duty, investors said; at Entrée Capital, partner Avi Eyal claimed that four Israeli startups in his portfolio were continuing to raise funding rounds this week, despite disruptions. “Israelis are extremely resilient and tenacious. They have an ability to multi-task and overcome personal feelings to get on with the job,” he said. “We are finding this tremendous ability of startups to maintain operations at the least, and some even do more than just maintain.”
Two weeks ago, Pelles.ai CEO Yael Meretyk Hanan and CTO Ido Glanz were in the U.S. on a work trip. Now, he’s in active service, while Hanan works to keep their startup afloat.
Yael Meretyk Hanan
But others have had no choice but to pause operations. At Covered, a healthcare startup building technology to help people appeal wrongly-denied medical claims, CEO Corey Feldman is one of just two employees. After taking 18 investor meetings in the week before getting called up, Feldman’s call back into service has forced him to hit pause on a crucial fundraising push.
Scheduled to fly back to Israel from the U.S. on Monday to rejoin the special operations Givati brigade as a combat infantry soldier, Feldman said his cofounder will keep the business afloat while he focuses on training. He’s hopeful the break will help him identify the right investors once he’s back. “It will be a litmus test for the kind of partner that I want,” Feldman said. “The silver lining is that it roots out the people that shouldn’t be in the running.”
Danielle Eisenberg and Noy Leyb, the founders of BachPlace, which aimed to offer a smart booking tool for group trips, initially focusing on bachelorette parties, put their product on hold just after a site launch. Eisenberg is organizing relief efforts from New York, while Leyb flew to Israel on Sunday and reported for duty the next day. “This startup is my life… But sometimes there are things that are just more important,” Leyb said on Thursday. “Israel is the only thing I see right now; the rest is black.”
Goldstein from Folio, who has had to put her company on hold entirely, takes comfort in the idea that when she returns to company-building, the stakes might not feel so serious. “To be able to look at it and say, ‘Okay, this is not life and death’ — I can pause, I can breathe, I can make good business decisions, smarter ones, rather than going and freaking out.”
At Pentera, Ratzon, a former infantry captain, expressed optimism that his earlier-stage peers will figure it out. “If this is your time to kick ass and go all over the world evangelizing for your product market fit, and half your team is deployed, that’s very hard,” he said. “But knowing the DNA of these early entrepreneurs, I’m sure these guys will prevail and find ways to keep the fire going.”
Additional reporting by Tom Brewster and Rashi Shrivastava.
