After 7 October, Israeli startups confront an operational shock
The war placed people, staffing and financing under immediate pressure. The Bank of Israel’s changing forecasts show why company plans needed explicit assumptions about duration and disruption.
The Hamas-led attacks on Israel on 7 October 2023, the taking of hostages and the ensuing war brought devastating human consequences. Civilians in Israel and Gaza experienced killings, displacement and fear for missing family members. By 26 October, the UN humanitarian office was documenting mass displacement, severe shortages of essentials and pressure on hospitals in Gaza, as well as evacuations and displacement in Israel. These human realities formed the setting in which businesses were trying to function.
For Israeli technology companies, the immediate questions concerned people’s safety, availability and ability to meet existing obligations. A functioning cloud service could coexist with an engineering team facing military mobilisation, disrupted childcare or bereavement. Subsequent economic forecasts help explain the wider pressures. Individual companies’ performance and their staff’s experiences required a closer account of their own circumstances.
Expectations about the war's duration changed the forecast
On 23 October, the Bank of Israel’s Research Department projected GDP growth of 2.3 percent in 2023 and 2.8 percent in 2024. Its working assumptions concentrated most of the war on the southern front and most direct economic effects in the final quarter of 2023. The bank emphasised unusually high uncertainty about the war’s duration, scope and nature. Any plan using the forecast needed to account for those assumptions.
| Period or category | % annual real GDP growth |
|---|---|
| 23 October 2023 forecast for 2024 | |
| 27 November 2023 forecast for 2024 |
Bank of Israel Research Department projections for annual GDP growth in 2024. The two estimates refer to the same national measure; neither represents observed growth or startup revenue.
An unscheduled update on 27 November lowered projected growth to 2 percent in both years. The revised framework allowed direct effects to continue into 2024 with declining intensity. The change illustrated how quickly a planning horizon could move. These were conditional national assessments based on information available after the attacks. A company’s revenue outlook could differ substantially, and actual economic growth remained unknown.
Supporting staff and maintaining critical work
The initial forecast identified emergency mobilisation and school closures as constraints on labour supply. The revision again pointed to reserve mobilisation and the partial closure of educational institutions, alongside impaired production capacity in affected areas. Their effect on a startup depended on its team: which people could work safely, which responsibilities they held and which commitments depended on them.
A useful continuity plan would make room for leave, caregiving and uncertainty about return dates. It could identify a second person authorised to approve a payment, restore a production service or answer a critical customer question. That work should reduce demands on people already under strain. Treating every absence as a scheduling problem would miss the circumstances that made the schedule unreliable in the first place.
Continuity depends on people as well as systems
A company using infrastructure outside Israel might retain access to its servers while losing access to specialist knowledge or the people authorised to make decisions. A hardware business could face a different combination of laboratory access, qualified technicians and component deliveries. Exposure depended on where each company’s work and authority sat. The central bank’s national forecast identified broad pressures; locating critical dependencies required a review of the business itself.
For management, the practical unit of review was an obligation and the resources needed to fulfil it. Completing an installation might require a person, a physical part and customer access on the same date. Supporting an existing software deployment might require credentials and institutional knowledge held by one engineer. A second office or an overseas cloud account would only provide continuity if the relevant work and authority could actually move.
The cash effect could arrive before a cancelled contract
The bank’s initial forecast expected industrial investment to be affected by uncertainty and higher financing costs, referring to increased corporate bond yields. Venture financing terms needed separate assessment. A startup’s position depended on its cash, investors, debt obligations and customer receipts. A company with committed funding faced a different problem from one relying on a financing round to close within weeks.
Operating delays could nevertheless alter either company’s cash requirement. An implementation completed later might postpone acceptance and payment, while payroll and supplier bills continued. A customer contract could remain legally intact but contribute less immediate liquidity than planned. Finance teams therefore had reason to update the timing of receipts and unavoidable commitments, including the cost of temporary cover or relocation, wherever those measures were relevant.
Customers and investors needed specific evidence
International customers could ask whether service levels and delivery dates remained credible. A general statement of resilience would be less useful than an account of the functions still available, the work rescheduled and the arrangements for urgent support. Teams also needed to protect staff privacy. Customers could receive an honest operational update without being given personal details about employees or their families.
Investors assessing additional capital had to understand the cause of a funding gap. Temporary disruption could create one even where the underlying product remained useful. An existing problem with demand or unit economics would require a different response. Revised delivery schedules, customer commitments and a cash forecast linked to them would help distinguish the two. National GDP estimates supplied context, while the investment decision depended on evidence from the company.
Planning for uncertainty meant making reversible decisions
The forecast revisions showed why one assumed end date was a fragile basis for a company plan. Boards could instead examine a shorter disruption and a longer one, identify the resources each would require and set dates for reviewing commitments. Deferring an expansion, sharing responsibilities or obtaining temporary support could preserve options when the duration of disruption remained unknown.
Such decisions needed to respect the people carrying them out. The humanitarian record described lives and communities damaged on both sides of the border; business continuity was a limited task within that much larger crisis. A responsible operating response would maintain essential services, communicate honestly and give affected staff practical support, while making the financial assumptions behind those commitments explicit.
Investment implications
- Continuity depended on actual staff availability, delegated authority and customer dependencies, alongside care for affected people.
- The central bank’s projections depended on assumptions about the war. Actual economic outcomes remained uncertain.
- A company’s funding needs could change through delayed delivery and collections even if its customer contracts remained intact.
Sources
- Research Department Staff Forecast, October 2023 (opens in a new tab)
Bank of Israel
- Research Department Staff Forecast, November 2023 (opens in a new tab)
Bank of Israel
- Hostilities in the Gaza Strip and Israel | Flash Update #20 (opens in a new tab)
United Nations Office for the Coordination of Humanitarian Affairs
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