Nearly half of new startups are choosing to incorporate outside of Israel, as highlighted by the Israel Advanced Technology Industries Association (IATI). This shift is primarily due to the perceived ease of regulations in the United States.
- A spokesperson for the Minister of Innovation, Science and Technology did not provide immediate comments on the situation.
A recent survey conducted by the IATI, which represents Israel’s high-tech sector, revealed that 45 per cent of approximately 460 startups in 2025 opted not to incorporate in Israel. This marks a significant change from 2022, when 80 per cent of startups chose to establish themselves domestically.
Startups: Impact of Regulatory Changes
The trend towards incorporating in the United States began in 2023, partly triggered by the Israeli government’s proposed overhaul of the judicial system. Although this plan was put on hold following the attacks on October 7, 2023, by Hamas militants and the subsequent conflict in Gaza, many companies continue to prefer incorporation in the US, especially in Delaware.
Concerns of Industry Leaders
During an IATI conference, tech leaders expressed their concerns regarding this trend. Dan Shamgar, chairman of the IATI’s lawyers and accountants committee, warned that incorporating abroad gradually shifts economic activity away from Israel and undermines the reputation of Israeli high-tech.
“Legislation and policy in the US over the past year have been geared toward encouraging companies to incorporate and operate in the US. Entrepreneurs and investors are not indifferent to this, and the impact is already being felt on the ground,” Shamgar stated. He emphasised that it is the state’s responsibility to adopt mechanisms and incentives that bolster the competitiveness of the Israeli economy to encourage companies to remain active within Israel.
Response from Government Officials
A spokesperson for the Minister of Innovation, Science and Technology did not provide immediate comments on the situation.
The Importance of the High-Tech Sector
The high-tech industry is a crucial driver of Israel’s economic growth, contributing approximately 20 per cent of economic activity and accounting for around 15 per cent of jobs, along with more than half of the country’s exports.
Challenges on the Horizon
At the same conference, industry leaders pointed out several challenges facing the tech sector. They highlighted the need for increased local capital, noting that foreign investment currently dominates. Additionally, they stressed that health tech should be a focal point for future investments following a recent downturn.
