Earlier this year, respected Israeli economists and businesspeople issued dire warnings about the potential effects of judicial reform on their country’s economy. They are now citing a major decline in venture-capital investment over the past year and Moody’s recent decision to downgrade the Israeli economic outlook from “positive” to “stable” as evidence that they were correct. Michael Fertik is not convinced:
Israel is in a superb position—probably the best globally, except for the United States—to ride the current and future waves of venture-capital allocation. Israeli startups have never been stronger, more inventive, more dynamic, more sophisticated, or more attractive. The recent downturn in venture-capital investment in Israel mirrors the declines across the globe. It has precious little to do with how many opposition Knesset lawmakers get to vote on judicial candidates.
For reasons of their own understandable concern, political conviction, or personal inclination toward catastrophic thinking, commentators against the judicial reform link a couple of juicy data together to paint a picture of looming economic doom for the state of Israel.
Israel is experiencing a venture-capital reset along with the rest of the planet. It’s a healthy and good thing. You might even conjecture that over the past decade, there has been too much venture capital flowing into companies around the world, perhaps into Israeli startups more than those of most other countries. A reset is fine. It’s right. It’s typical. And it will make Israeli startups only stronger in the medium and long term. And, more than anything else, no matter your political opinion, the venture-capital reset has just about zippo to do with judicial reform.