Over the past two weeks we have published dozens of stories on Israeli tech at Techwire, and looking at them together reveals a picture that appears in no single headline. Axonius is cutting 22% of its development center in Israel. Tastewise is downsizing, with most of those laid off here. Israeli companies are raising hundreds of millions of dollars, but many are registered in New York, and the next round of hiring often happens in Lisbon, Warsaw or Bangalore. Meanwhile, the political system is mostly busy with itself.
The data is not new, and that is precisely what is worrying. The Israel Innovation Authority's 2026 high-tech status report showed a 6.5% drop in the number of R&D employees in Israel, the first in a decade, and a decline in the share of employees based in Israel among all employees of Israeli tech companies. These are not the numbers of a sudden crisis. They are the numbers of slow erosion, the kind nobody announces, until one day you discover the economy's engine has started running from somewhere else.
It is easy to blame AI, and companies do so gladly: 'we are rebuilding our development organization around AI.' Some of that is true. But AI does not explain why the cuts fall on Israel rather than on teams abroad. The real explanation is simpler: an Israeli engineer is no longer cheap, uncertainty here is high, and years of war, reserve duty and political crisis have taught management to spread risk. When cuts are needed, they cut where it looks risky.
What needs to happen? Not slogans about the 'Startup Nation,' but three practical things. First, a stable, multi-year budget for the Innovation Authority that does not depend on coalition negotiations. Second, tax policy that encourages companies to keep development and intellectual property here, not just the founders' small office. And third, national AI computing infrastructure, so an Israeli startup does not have to rent every processor hour from a foreign cloud company. None of these steps is right-wing or left-wing. All of them require a functioning government.
Israeli tech has survived wars, economic crises and bubbles that burst. It will survive this period too. The question is where. If important decisions keep being postponed until a government is formed, then until it stabilizes, then until the next election, companies will not wait. They already are not waiting.
We at Techwire will keep following the data, even when it is uncomfortable, and keep putting these questions to those who seek to lead the country. Tech is not one sector among many. It is half of Israel's exports, and a large part of the taxes that fund everything else. Whoever neglects it neglects everyone.
