The current strengthening of the shekel against the US dollar, which in April fell below NIS 3 per dollar for the first time in over 30 years, has become a headache for many high-tech startups that rely heavily on exports priced in dollars rather than on shekel-denominated income.
The dollar fell by approximately 20% against the shekel over the last year, mainly because the Israeli currency and economy strengthened over the last few years despite the war.
The main problem for the high-tech sector, which employs 10% of Israel's workforce and represents 40% of the state's tax revenue, is earning income in one currency while paying salaries in another.
A vulnerability in a sector that accounts for 17% of Israel's GDP and provides NIS 55 billion in revenue to non-technology-related industries (such as office real estate companies, leasing, catering, and more) is worrying for the whole country.
But for many specialists, this situation is not an "unmanageable crisis," mainly thanks to several financial tools available for the sector to handle the strong shekel.
Hedging dollar transactions
The main option for Israeli high-tech companies to avoid the current instability in Israel's exchange rates is to hedge their dollar transactions, according to Venture Capital Michael Eisenberg.
Eisenberg, who works as a managing partner at the Israeli VC firm Aleph, already warned of this situation in 2021 and recommended that all the startups managed by his fund hedge their transactions to avoid the crisis.
Hedging dollar transactions and currency transactions in general is a financial tool used by companies that helps establish stable exchange rates for buying and selling currencies, providing greater stability and predictability.
Eisenberg identified the main damage to the various funds' portfolio companies as a result of the weakening dollar in their emerging need to raise funds earlier than usual: "Every 10% shift in the shekel-dollar exchange rate removes between 150 and 200 months of runway among our portfolio companies that did not hedge the dollars they raised."
Runway months indicate how much time a startup has left to operate before it runs out of money, based on its current spending rate.
Israel's high-tech resilience amid war
Even in the current situation, the Israeli high-tech sector has shown notable resilience, both during the war and amid a weaker dollar.
"Alongside high-tech, the Israeli capital market is also showing strength, and the overall basic conditions in which Israeli high-tech operates allow it to also cope with the currency challenge, although this becomes more difficult as the trend of the dollar weakening against the shekel continues," warned Chen Herzog, Chief Economist of BDO Consulting Israel.
"Assuming that this trend will indeed continue, and perhaps even strengthen, it is possible that the progress of the companies' development and projects will be harmed, thus leading to a snowball effect that could harm the companies' profitability, and subsequently also their pace of investment, development and competitiveness," said Tal Kreizler, CEO of No-Traffic, a company that develops and markets an AI-based transportation management.
If the situation continues to develop at this rate, even after the hedging period ends, companies will face markedly different outcomes. "It is enough to examine a startup company that began operations in April 2024, when the dollar was worth about 3.7 shekels, to understand that every million dollars it raised then made about NIS 3.7 million available to it, while in April 2026 those same million dollars already constitute about NIS 700,000 less in its coffers," explained Roy Aldstein, managing partner, CFO and COO of the Israeli Team8 fund.
Edelstein recognized that the situation is problematic for the high-tech sector, but also said that it's "good for the rest of the country," adding that "High-tech will find a way to cope. Along with this, it should be noted that at this time there is no known point at which the continued strengthening of the shekel against the dollar will be a kind of point of no return from which high-tech will not be able to recover."