Fintech in Crossfire: How Israel-Hamas conflict impacts the “startup nation”

abdelaziz Fathi

The Israel-Hamas conflict had a multi-dimensional impact on the fintech and broader tech industry in Israel and elsewhere, affecting workforce availability, business operations, financial outlooks, and the long-term strategic planning of relevant companies in the region.

Israel has been a big name in the world of fintech, home to over 500 startups spanning banking, finance, data science, biometrics, blockchain, cybersecurity, online trading, and digital payments. These sectors represent over half of the country’s exports and account for nearly one-fifth of its GDP. Israel is also home to one-third of the world’s cybersecurity unicorns.

That said, the country has become a tech hotspot, thanks to its talented security experts, successful Israeli companies in the U.S., partnerships with big international firms, and government support.

Before the crisis

Even before the crisis, Israel’s fintech industry was facing a tough time, often referred to as the “fintech winter.” This period was marked by a significant drop in investments and the emergence of new companies in the sector.

Data from Start-Up Nation Central for the first half of 2023 showed a dramatic fall in private investments in Israeli fintech. Investments plummeted to $545 million, a stark contrast to the $2.6 billion in 2022 and $6 billion in 2021. This was disappointing, especially given Israel’s track record of producing 2-3 fintech “unicorns” each year for the past 7-8 years.

However, this decline was part of a global trend in the fintech sector, impacted by high inflation, rising interest rates, falling company valuations, layoffs, and strict regulations, especially around the crypto market.

The very next day

The war not only escalated the loss of life and instability in the region but also affected business operations in several ways. Let’s take a look.

  • Workforce Impact: The Israeli Defense Forces called up over 300,000 reservists, many of whom were working in the tech sector. This draft significantly reduced the available workforce, with about 10% of tech employees in Israel being drafted, and up to 30% in some companies. For example,, a major tech company in Tel Aviv, reported that around 6% of its global workforce was called up.
  • Business Operations: Companies in the region, including those in the fintech sector, faced disruptions. This was due to a combination of factors such as reduced workforce availability, changes in consumer behavior, and shifts in the focus of government and economic resources toward the conflict.
  • Advertising and Revenue: The war also affected advertising and revenue streams. For instance, Snap reported pauses in spending from brand-oriented advertising campaigns immediately after the war began, impacting their revenue. Similarly, Meta (Facebook and Instagram’s parent company) experienced softer advertising spending correlated with the start of the conflict.
  • Supply Chain and Financial Outlooks: Companies like Align Technology anticipated increased challenges, including potential supply chain issues. This, in turn, affected financial outlooks and operational margins, as companies had to adapt to the new circumstances, sometimes with cost-cutting measures like employee severance.
  • Global Tech Scene: The situation raised concerns among international corporations doing business in the region. Companies like Aon and West Pharmaceutical focused on supporting their employees and family members in the affected areas.
  • Long-Term Effects: The war prompted questions about the future of Israel’s vibrant startup and technology scene. Entrepreneurs and businesses were forced to reconsider their strategies in a rapidly changing environment, especially with the increased likelihood of employees being repeatedly called in the future to serve in reserve units.

Crypto in the Spotlight 

The Israel-Hamas conflict has had wide-ranging implications across various sectors, and these are particularly felt in the cryptocurrency market. Yet, there’s a lot of speculation and analysis about how this conflict is actually affecting virtual assets.

A key point was that Hamas’s attacks on Israel were partially funded through cryptocurrency. Many reports detailed large amounts of crypto transactions linked to the Palestine Islamic Jihad (PIJ) and Hamas, indicating a reliance on digital currencies for funding.

Israeli authorities, with assistance from popular crypto exchanges like Binance, successfully identified and blocked the crypto accounts used for funding by Hamas. An important takeaway from this situation is the ability of intelligence agencies, like those in Israel, to track and restrict Hamas-owned digital asset wallets. Using blockchain analysis, these agencies have shown a new method of undermining their activities by cutting off their financial resources. 

Israeli government steps in

In response to the war with Hamas and its impact on the Israeli tech sector, particularly startups, Dror Bin, head of the Israel Innovation Authority (IIA), reiterated the government’s commitment to supporting the sector. Bin stated that the government is ready to do “whatever it takes” to ensure the survival and growth of Israeli tech companies during and after the war. This includes a dedicated fund of $100 million to assist early-stage companies at risk of running out of funds due to the war’s impact.

Bin also highlighted the vital role of the high-tech sector in Israel’s economy, noting its significant contributions to economic output, employment, and exports. However, the war has increased caution among foreign investors and created labor shortages in the tech sector, with 10-15% of workers being called up for military service, he notes.

The IIA’s emergency funding, which only needs to be repaid if companies become profitable, requires start-ups to secure matching funds from the private sector. In the first two rounds, the IIA disbursed about 160 million shekels ($43 million), with more rounds planned.

Beyond the immediate funding, Bin discussed broader issues facing the Israeli tech sector, including a decline in the number of startups founded annually, reliance on foreign funding, and lack of diversification. To address these, the IIA plans to establish innovation centers across Israel and encourage investment in a wider range of fields beyond cyber security and fintech. The goal is to diversify both the geographic and sectoral focus of Israeli tech startups, promoting innovation in “deep-tech” fields beyond software.

Finally, Bin mentioned exploring incentives for Israeli institutional investors to invest more in domestic tech startups. These measures could include downside protection or enhanced benefits for investors, with details expected to be announced soon. 


Ran Strauss, CEO and Co-Founder of Leverate, a leading tech provider for brokers, shared with FinanceFeeds his perspective on how the Israeli conflict has influenced the fintech and brokerage sectors.

Strauss begins by addressing the permanence of the conflict’s impact, expressing a cautiously optimistic view. He notes, “It’s undeniable that war influences every business, impacting sales due to reduced customer purchases or complicating production processes. Fortunately, with more than 10 years of experience and strong, loyal partnerships with our clients, we have not encountered any irreversible changes.”

On the macro scale, Strauss acknowledges the downturn in investment in the Israeli fintech sector, citing a dramatic decline in total investments.

The operations of Leverate, as Strauss outlines, have undoubtedly felt the war’s impact, particularly through manpower shortages and the emotional toll of operating in a conflict zone. Yet, the company’s response to these challenges has been noteworthy. “Despite these challenges, we are proud to affirm that our customers experience no interruptions in service.”

In terms of mitigation strategies, Leverate’s approach has been human-centric. Ensuring employee safety, enabling remote work, and providing support within the company have been pivotal. Strauss’s experience with the COVID-19 pandemic also provided a blueprint for adapting to the current situation, he notes.

When discussing market trends and investor behavior, Strauss provides a reassuring perspective. “Thankfully our business has been not impacted at all,” he states, suggesting a level of insulation from the broader market uncertainties that have characterized the Israeli fintech landscape during the conflict.

 Michael Pearl, Chief Operating Officer at Kirobo and a seasoned executive in the fintech and blockchain sectors, provided a deeper understanding of the nuanced impact of the Israeli conflict on the fintech and brokerage industry. Pearl’s insights, drawn from a decade of experience, offer a blend of immediate challenges and long-term optimism for the sector.

Firstly, Pearl addressed the uncertainty of the conflict’s lasting impact, stating, “It’s hard to define whether the effects are permanent or not. This depends on the length of the war and its consequences.” Yet, he firmly believes in the resilience of the Israeli high-tech industry, rooted in “an entrepreneurial spirit and expertise that prompted companies like eToro and Fireblocks.” This foundation, according to Pearl, is crucial for encouraging innovation even in times of conflict.

Michael Pearl, Chief Operating Officer at KiroboA particularly compelling aspect of Pearl’s analysis is his observation on the potential benefits arising from adversity. He notes, “Many of the leading engineers in those companies were called to duty, where they had to improvise and find crucial solutions to help the war effort. For instance, in the fields of AI and crypto forensics. This knowledge and inventions will give birth to many new products and companies.” This perspective suggests that the conflict, while disruptive, could inadvertently serve as a catalyst for technological innovation within the nation’s fintech sector.

On the operational front, Pearl shares the direct impact on his company: “20% of the employees in my company were called to the reserves and have been out of office since October 7.” 

Investor sentiment is another area where Pearl offered valuable insights. He acknowledges reluctance among some investors but counters, “I believe that for the long run they will find out that they missed out on great investments.” Pearl’s confidence is rooted in the strength of Israel’s fundamentals in fintech innovation, suggesting a temporary impact on investments rather than a long-term deterrent.

Pearl concludes with a forward-looking statement that sums up his overall stance: “Again, I think that the fundamentals will outpace the effects of the war.”

Saul (Shauli) Rejwan, the founder and managing partner of Masterkey VC, focuses on the economic and social ramifications. He starts with a reminder of the human element of the conflict, highlighting the number of individuals called to the front lines and its ripple effects on the Israeli economy.

Rejwan then provided a detailed snapshot of Israel’s workforce dynamics, noting, “Israel’s workforce is nearly 2.5 million, with around 1.2 million employed in the municipal sector.” He raises a critical point about the scale of impact, pondering if “a third of these [in the private sector] are reservists”. This demographic insight into the workforce composition sheds light on the depth of the challenge faced by the Israeli economy, with a big portion of its most economically active individuals potentially drawn away from their civilian roles.Saul (Shauli) Rejwan, the founder and managing partner of Masterkey VC

The narrative then shifts to touch on the structural aspects of the Israeli economy, pointing out that its size could actually help it move quickly and respond well on the world stage. He suggests, “Given that the Israeli economy is considered small to mid-sized by global standards, this can actually be an advantage.”  

Looking ahead, Rejwan feels optimistic about Israel’s economy after the conflict, expecting the country to grow a lot in the year after the war. He concludes, “as the world shifts gears to emerge from the recession, I believe we will witness significant growth in the 12 months following the war.” 

Steve Crews, a veteran banker and mortgage advisor, paints a picture of a sector caught in the crossfire of conflict but buoyed by governmental support and the resilience of some investors.

Crews highlights the immediate challenge faced by the sector, notably the workforce disruption due to the mobilization of over 300,000 military reservists. Many of these individuals are employed in the tech sector, leading to a critical manpower shortage that “has led to a shortage of manpower in many early-stage startup companies.”

 Steven CrewsThe investment landscape within Israel’s tech startups and companies has also experienced major shifts, as Crews points out. There was a “plunge by 56% in 2023 compared to the same period in 2022” in tech investments, with the fintech market specifically witnessing a “19% decline in investment in 2022.”

Despite these setbacks, the Israeli government’s stance offers a glimmer of hope. With a commitment to “support its tech industry through the conflict,” the government plans to roll out “$10 billion in aid,” to mitigate the adverse effects and ensure the sector’s resilience.

Investor behavior, as Crews elaborates, has been mixed in response to the unfolding conflict. While some investors have shied away from risk assets, leading to a “drop in stock prices,” there has been a notable resilience among others. This resilience is evidenced by the recovery of the “Israeli shekel and the Tel Aviv Stock Exchange to their pre-war levels”.

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