By Steven Scheer
JERUSALEM (Reuters) -Nearly half of new startups are choosing to incorporate outside of Israel, the Israel Advanced Technology Industries Association (IATI) said on Tuesday, citing easier regulations in the United States.
According to a survey by the IATI, an umbrella organization for Israel's high-tech sector, 45% of about 460 startups in 2025 chose not to incorporate in Israel. In 2022, 80% of startups incorporated in Israel.
The trend to incorporate in the United States began in 2023,
triggered by an Israeli government plan to overhaul the country's judicial system. While that plan was shelved in the wake of the October 7, 2023 attacks on Israel by Hamas militants and the war in Gaza that ensued, companies continue to choose to incorporate in the United States, particularly in Delaware.
At an IATI conference on Tuesday, tech leaders said they have been warning the government of this trend.
"Incorporation abroad gradually shifts economic activity out of Israel and erodes the brand of Israeli high-tech," said Dan Shamgar, chairman of the IATI's lawyers and accountants committee.
"Legislation and policy in the U.S. over the past year have been geared toward encouraging companies to incorporate and operate in the U.S. Entrepreneurs and investors are not indifferent to this, and the impact is already being felt on the ground," said Shamgar, partner at the Meitar law firm. "In Israel, however, economic policymakers remain indifferent to the trend."
He added that it is the state's duty to adopt mechanisms and incentives that will strengthen the competitiveness of the Israeli economy in order to encourage companies to concentrate their activity in Israel.
A spokesperson for the Minister of Innovation, Science and Technology had no immediate comment.
High-tech is a key Israeli economic growth driver, accounting for about 20% of economic activity, some 15% of jobs and more than half of exports.
Also at the conference, tech leaders said that among the challenges facing the sector were the need for more local capital as foreign capital dominates while health tech should be a key focus of investment after a recent slump.
(Reporting by Steven Scheer; Editing by Sharon Singleton)
