‘Start-Up Nation’ Is Tested as Israel’s Reservists Leave Their Desks

As Israel puts itself on war footing on a scale not seen in decades, it has imposed one of the biggest military mobilizations in the country’s history.

And that call to service is falling especially hard on the scores of small companies that have long inspired the national nickname “Start-Up Nation.”

“Even if you don’t know someone pulled into the military, your colleague does, your neighbor does,” said Adam Fisher, a partner at Bessemer Venture Partners, an investment firm. “Every day, we hear about someone else we know whose child was murdered or severely injured or is missing.”

Israel’s defense forces have called up about 360,000 reservists for duty. Such numbers will test the resilience of the technology community that contributes about 20 percent of the country’s economy — and a significant portion of global activity in cutting-edge areas including cybersecurity, artificial intelligence and semiconductors.

The mobilization represents about 4 percent of Israel’s population of about nine million. But investors and start-up founders say that tech companies, and especially start-ups, are likely to face a disproportionately high share of that, given their younger work forces.

Start-ups are not alone in being drawn into the war in Gaza: Major global companies, especially those in tech, have significant numbers of employees in the country. Microsoft said this week that it had nearly 3,000 workers in Israel.

The semiconductor giant Nvidia confirmed that a man seen on video being kidnapped by Hamas assailants at a music festival last weekend was an employee named Avinatan Or. The company has also canceled a conference in Tel Aviv that was scheduled for next week.

The Israeli economy has shown resilience to military action before, Moody’s, the credit rating agency, said this week. But it added, “A prolonged conflict that durably and significantly impairs economic activity and policymaking would test that resilience.”

For some start-ups with limited resources, the conflict is felt acutely. Some have lost employees and family members to the fighting. Others are learning to cope with smaller staffs because of the call-up.

At HiBob, a human resources software provider in Tel Aviv, about 6 percent of the company’s Israel-based employees, or 25 people, had been mobilized, according to Ronni Zehavi, the founder and chief executive. He also said that his own son and daughter were called up last weekend and have been deployed to the front lines.

A week ago, he said, the company raised $150 million, giving it a valuation of $2.7 billion. But after the government declared war on Hamas, Mr. Zehavi said, HiBob began checking on employees’ physical and mental health and reconfiguring its teams to pick up projects from mobilized workers.

Deel, a global payroll company, said its clients had about 1,300 employees and contractors in Israel who have been affected. That includes Deel itself, which has more than 80 employees based in Israel, said Alex Bouaziz, the company’s Israel-based co-founder and chief executive. Some workers, including an executive, flew in from abroad to report to duty.

“I’m obviously very worried about my teammates,” said Mr. Bouaziz.

A surge in patriotism is driving others in the community to volunteer for service.

“I have friends texting me who are saying, ‘Why aren’t I being called up?’” said Shiran Shalev, a partner at the venture capital firm Battery Ventures.

Start-ups are affected in other ways. About 25 of HiBob’s employees were evacuated from their homes because of the violence, and needed housing and supplies like clothes, phone chargers and toys for their children, Mr. Zehavi said.

Companies must also deal with families who need child care because of deployed parents and shuttered schools, and more. At the same time, businesses said that they felt pressure not to let down their clients, most of whom are abroad.

Start-ups are also responding to the conflict in other, nonmilitary ways.

Mr. Zehavi said that HiBob was building a system to help match volunteers with needs, including helping in hospitals or transporting reservists. And Mr. Bouaziz said that he and other executives had been buying clothes and supplies for soldiers.

Members of the tech community were quick to contend that they had faced daunting challenges before, including previous mobilizations and the coronavirus pandemic. Still, they acknowledged that it was unclear for how long the Gaza fighting would persist, or how large the scale of the war would grow.

“How that plays out in terms of economic impact, I think it’s too soon to tell,” said Avi Hasson, the chief executive of Start-Up Nation Central, an Israeli nonprofit that connects investors with companies. Noting that he was traveling between two memorial services, he added, “We’re still in the funeral stage.”

But others insisted that the community would continue to build the kinds of businesses that have made Israel a haven for entrepreneurs. They pointed to a global outpouring of support, such as a public letter signed by hundreds of prominent investment firms like Bain Capital Ventures and Warburg Pincus.

“Do I think that ‘Start-Up Nation’ goes away?” said Mr. Shalev. “Absolutely not.”

Ephrat Livni and Liz Alderman contributed reporting.