As the war with Iran enters its second month, about 50 percent of small startups and more mature tech firms say the absence of employees is taking a toll on both meeting development goals and product launches, according to a survey by the Israel Innovation Authority.
The past 31 days have been a challenge for businesses and employees in Israel. Thousands of employees are away on reserve duty. Others are occupied with children as schools have remained closed, and the fatigue from the constant rush to shelter every time a siren sounds due to Iranian missile attacks.
To assess the war’s impact, the Israel Innovation Authority conducted a survey among 637 CEOs, founders, and executives of high-tech companies and startups during the third week of fighting with Iran, between March 18 and March 23. About half of the surveyed reported that more than a quarter of their workforce is absent, due to a combination of reserve duty, lack of educational frameworks, and security restrictions.
“At present, the sector is facing a range of challenges related to human capital, supply chains, product development, and access to capital,” said Israel Innovation Authority CEO Dror Bin. “Experience from recent years shows that the sector has proven its ability to recover quickly.”
Among the reserves are many employees working in the tech sector, the growth engine of the Israeli economy. As a result, startups and tech firms, while continuing to operate, face widespread human capital shortages, which are disrupting their business activities. The challenges translate into delays in meeting development deadlines and product launch milestones.
Out of the surveyed startups and tech firms, 42 percent reported delays in meeting development goals, with 22% stating that they have already substantially postponed development milestones or product launches.
“The tech industry knows how to operate also in these difficult times, as it has gone through and learned from the October 7, 2023, Hamas onslaught and the war with Iran in June [2025],” said Karin Mayer Rubinstein, CEO of Israel’s Association of Tech Industries (IATI), an umbrella organization of high-tech firms operating in Israel.
“The main challenge now is the workforce shortage, where damage is caused to production and in the supply chain, of companies that are manufacturing as well and have plants,” she said.
Alongside workforce disruptions, the survey’s responses showed that restrictions on international flights due to the virtual closure of the country’s airspace were impacting business operations of 75% of startups and tech firms.
More than half of startups and tech firms said they were experiencing difficulties or delays in importing equipment, components, and raw materials due to the ongoing war with Iran, which in turn affects local production.
Moreover, the virtual closure of Ben Gurion Airport, Israel’s main international gateway, is posing difficulties to attending business meetings, participating in global conferences, conducting sales, forming partnerships, and attracting investment.
About 71% of the surveyed tech companies reported that the war situation has affected capital raising or investment processes. Among them, 37% reported delays, 23% said that investors have postponed investment decisions, and 11% reported complete cancellations of plans.
The Israeli tech industry is highly reliant on foreign capital, as about 80% of venture capital investments in local tech startups are generated from foreign funds.
In light of operational disruptions and funding difficulties, 31% of the surveyed tech companies said they were considering relocating business activity abroad. A quarter of the tech companies considering overseas relocation were also fearing closure of their business operations if the war with Iran continues for another month.
Source:
www.timesofisrael.com
