Post-Israeli political chaos, can NYC change the Startup Nation as ... - CTech

The past few months have been extremely challenging for Israeli tech founders.

On the one hand, we are in a down market where VCs are deploying less capital, and that has resulted in a 70% drop in funding in the first quarter of 2023 compared to the same time last year. On the other hand, there is political chaos in Israel around the overhaul of the country’s judiciary, and that has raised serious questions around the future of the country’s startup ecosystem.

Global VCs and LPs recognize the exciting opportunity of investing in top Israeli talent, but today, they are cautious.

As entrepreneurs and investors seek stability, some are left wondering if this is the right time to invest in startups based in Israel given the political climate. Against that backdrop, New York City is emerging as a viable alternative for Israeli startups seeking a more predictable environment in which to grow.

NYC is already home to over 400 Israeli startups, and has become the go-to-hub for Israeli founders expanding to the U.S. market over the past few years. The Big Apple offers advantages for Israeli startups, such as a large and diverse talent pool, access to funding, and close proximity to customers and partners.

The city of New York has identified a new opportunity now – luring more Israeli startups to join its vibrant tech scene by making it even more attractive to build and grow their businesses.

Can NYC challenge Startup Nation?

It is now a fact. Israeli founders are looking elsewhere for funding, and given the political situation, many are thinking about leaving the country and relocating for a few years. Our recent survey on LinkedIn shows that NYC is the prime spot for Israeli founders if they decide to leave.

Startup founders also recognize that there’s a lot NYC has to offer. Despite current market conditions, enterprise tech is booming in NY, which is a great sign for Israeli founders building enterprise software solutions (cyber, dev ops, generative AI, etc.). Dozens of NY-based VCs have already invested in Israeli startups, and many more have an interest in Israeli tech.

A recent article by work-bench highlights the fact that NYC Enterprise Tech Beats Pre-Pandemic Highs: $6.2B raised in 2022. This is massive.

In addition, New York state is making a major effort to bring innovation from all over the world to New York, and Israel is on the top of that list. The Empire State Development Corporation recently announced $500M allocated for new funds to invest in startups and small businesses, with the expectation that a big wave of founders will try to get a piece of that funding.

The NYC venture scene is hungry

For New-York techies it feels like it’s been way longer, but the New York venture scene became a significant source of deployable capital just about a decade ago. Previously, Israeli entrepreneurs had to decide between the Bay Area and Boston, but due to former New York City Mayor Michael Bloomberg’s long-term vision of making the city into a thriving tech center, New York has become the destination for global entrepreneurs.

A tech ecosystem needs a robust venture community and support system to fund and grow early-stage companies. NY tech has become the ultimate choice for startups from across the globe, tying Silicon Valley in the recent global startup ecosystem rankings published by Startup Genome.

According to this report by the New York’s State Comptroller, “from a venture capital perspective New York has shown strong growth in recent years as AUM more than tripled in the past five years, greater than the national growth of 160 percent. As a result, New York accounted for 15.0 percent of the nation’s AUM, up from 12.8 percent in 2016.”

2023 will see a market correction, with trends moving in the right direction. Though cautious, influential economic development organization the Partnership for New York City indicated in its recent report that “New York City companies attracted $28.2 billion in venture capital funding in 2022, the second highest funding total on record after 2021 ($48 billion raised), per Pitchbook data.”

That’s a great sign for Israeli founders as there is still a lot of dry powder in the city ready to be deployed during, (and once the recession we’re now experiencing), ends.

A strong local community, and one that can support a massive influx of Israelis ready to move to the tri-state area is a key element for founders seeking mentorship and advice. Those founders have done it before and were in the same shoes just a few years ago. Israeli founders based in NYC are extremely collaborative and helpful in providing tips, lessons learned on hiring talent, and access to investors and service providers.

We are in the midst of negotiations regarding a possible judicial reform in Israel, and we all look forward to seeing the direction the country will take. As things shape up, the momentum to relocate to NY will increase as more founders would like to take advantage of the opportunities NYC tech is offering Israeli founders during this uncertain time in Israel.

Eyal Bino is the Founding Partner of 97212 Ventures, a NY-based seed fund exclusively focused on investing in top early stage Israeli startups committed to building category defining companies in NYC.

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