Each company will need its own strategy, Vinitzki said. Some would opt for company-wide pay cuts, a “more humane” solution that lets a company keep the talent it worked so hard to acquire, he said. However, this is not always possible and some companies have whole departments or teams that are no longer required and need to be let go, he added.
Funds with extensive portfolios will have a harder time due to the crisis as they would have to put in more money to maintain their existing companies, and could make fewer new investments, Vinitzki said. “A fund that has just raised commitments and has accessible cash and not too many portfolio companies would enjoy less competition in finding long-term investment opportunities,” he added.
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According to Vinitzki, there might be a decline in the number of startups being founded, which is not necessarily a bad thing. The crisis caught the Israeli tech industry at a peak, where there are a lot of funds and a lot of companies out there and it is possible that some of these companies should not exist. On a positive note, he added, both the funds and a lot of the startups went into the crisis with a lot of money after closing new funds and funding rounds, so there is quite a lot of money to work with.
At times of crisis, angel investors are the first ones to go, as they are coming from different fields and, to them, investment in tech is a hobby of sorts, Vinitzki said. Veteran corporate funds, on the other hand, are likely to stay for the long-haul while newer funds, especially of companies that are not tech-oriented, might decide to cut back on future investment.
Israeli institutional investors may start taking a bigger piece of the tech pie, according to Vinitzki. “Institutional investors in Israel are in the midst of familiarizing themselves with the field and have selectively partnered with local funds on investments as they expand their knowledge and expertise.” The government should focus on helping medium-sized companies, employing 30-100 people, he said.
Vinitzki remains optimistic as to the Israeli tech ecosystem’s ability to survive the current crisis. “There is a huge industry in Israel and it is going to carry on but a lot of things are going to change in people’s lifestyles, for one thing, remote work will suddenly seem like an obvious valid option,” he said. Crises always give birth to new opportunities and Israeli entrepreneurs have been known to rise to the occasion, he added.
