For now, Israeli-American founder of insurtech startup Fairmatic Jonathan Matus is pushing ahead as planned with building up an R&D center in Tel Aviv, while warning that if the judicial changes will be implemented he will need to reconsider whether Israel is a viable location for doing business.
“If there will be a constitutional crisis, and Israel becomes a dictatorship, I will need to have a conversation with my board, because I have a fiduciary duty, not just to build the best product and to serve our customers, but also to protect our investors’ interests,” Matus told The Times of Israel during an interview on Thursday. “My story is unconventional. I am not the Israeli CEO that’s thinking about leaving, I’m a global CEO that is entering the country, but there are others who are here some of whom are the biggest employers in Israel, in the tech engine, such as Facebook, Microsoft, and Intel, much bigger than me, but they have similar considerations.”
“If my board needs to take a second look about our strategy of building an R&D office here, it’s not going to be dramatic, but for huge corporations that contribute billions of shekels to the tax system here that have many employees and households — for them to leave will be catastrophic,” he added.
Tech entrepreneurs and workers have been among the various groups vocally protesting the judicial overhaul on the grounds that it will erode Israel’s democracy and weaken checks and balances. The shekel hit a four-year low against the dollar this week as Prime Minister Benjamin Netanyahu’s coalition pushed ahead with legislation that would grant the government control over the appointment of judges, including High Court justices, and all but eliminate the High Court’s ability to review and strike down legislation.
One of the major worries in the tech sector is that the moves will make venture capitalists and other money makers leery of investing their money in the country triggering an outflow of funds. Israeli tech unicorn Riskified is the latest local firm to announce that they would be transferring $500 million out of the country and are offering a limited number of relocation packages to interested staff members.
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“Companies want to build their businesses and create jobs here, but they are looking at what’s happening and they are alarmed,” Matus said.
Fairmatic team at R&D hub in Tel Aviv. (Courtesy)
Founded in 2017, US incorporated Fairmatic has developed an AI and data-driven technology for commercial auto insurance of car fleets that tracks driving behavior such as hard braking, rapid acceleration, speeding and phone use to motivate and improve safer driving and reduce risk. The monitoring of driving performance creates a more personalized insurance option to determine and adjust premium pricing according to driver performance of commercial fleets.
Last week, the startup raised $46 million just six months after nabbing $42 million from a Series A round. The latest round was led by Battery Ventures and Bridge Bank, along with current investors including Foundation Capital, Aquiline Technology Growth and backed by tech angel investors, such as Yahoo co-founder Jerry Yang.
With the fresh capital, Matus is making a long-sought dream come true to open a presence in Israel with the launch of an R&D center. Born in New York and raised in Tel Aviv, the entrepreneur built his career working for Google and Facebook in the US and Asia-Pacific before co-founding mobility risk intelligence platform Zendrive in 2013.
“As someone who grew up here and spent 20 years in Silicon Valley, it’s always been both a fantasy and a desire to come to the ecosystem here and even though recent developments are making some of those efforts challenging, I’m still very much committed to giving back to the community, people, and economy,” Matus said. “I also believe that the talent here in Israel is the best in the world.”
The Tel Aviv center, where the auto insurance startup is planning to hire about 30 engineers, data scientists, and product managers, is adding to the R&D hub it operates in India and its presence in the US, taking its staff to about 90 people. The startup recently tapped Guy Shaviv, a former NASA researcher who has managed Israeli R&D centers, to head the engineering team in Tel Aviv.
“In Tel Aviv, we are about a third or halfway through the hiring,” said Matus. “Next year, we are probably going to double and in the US we are going to grow from 15 to about 30 employees.”
Tech workers protest against the government’s judicial overhaul, with a sign reading, ‘Time is running out for Israeli hi-tech,’ in Tel Aviv, on March 23, 2023. (Avshalom Sassoni/Flash90)
The former Android and Facebook mobile executive, who calls himself a Zionist, says coming back to Israel for good is not an option, citing his family relations and geographic distances.
“I have a wife and a child that’s American so we decided to live in Europe, and chose Portugal, which is halfway between the grandparents in Tel Aviv and the grandparents in New York,” he explained.
However, Matus now comes regularly to Israel to personally interview and hire engineers for the Tel Aviv hub.
“During the interviews, I noticed all of a sudden an alarming number of conversations where I mentioned to people that I live in Portugal and that became the center of discussion,” Matus recounted. “Some of the questions that come up are: What’s the relocation policy? Are you planning to build an office in Portugal? If I join you now, and in six months I move to Greece, can I still keep my job?”
Although initially surprised by the questions, Matus says he has a lot of empathy for the people that are raising these questions.
“I share their sense of alarm and sense of concern about the democratic nature of Israel,” he said. “I’m an optimist and I hope there is an elegant way out of this.”
Israeli tech company employees stage protest in Tel Aviv against judicial overhaul, January 21, 2023. (Courtesy)
“But if in a week or two, we are going to find ourselves in a constitutional disaster, there’s going to be more and more people that will seek out opportunities to work with global companies to seek out relocation packages, which will further escalate and hurt the Israeli economy in a time when it’s already fragile,” Matus cautioned.
Meanwhile, senior Israeli tech executives are said to be in talks with European countries, including Greece, Cyprus and Portugal regarding relocations. Greek ministers and diplomats, as well as other senior government officials, have reportedly held several meetings recently with Israeli entrepreneurs in an attempt to convince them to relocate.
During the meetings, generous relocation packages were presented to the Israeli executives, including tax breaks, fast-tracked citizenship, and the construction of special neighborhoods with schools and offices for them and their families.
“There are many compelling conditions for Israelis in Portugal including the immigration process, a treaty-friendly tax policy, and the cost of living is significantly lower,” Matus said.
Most recently, Matus has also come to Tel Aviv to take part in demonstrations against the changes to Israel’s judicial system adding that protests that are happening this week and on the weekend are “critical” in the process of the proposed legislation, which it is feared would turn Israel’s democracy into dictatorship. That’s as the coalition has said it seeks to enact all of its sweeping reforms by the time the Knesset breaks for Passover, in just over two weeks.
Matus says he also senses a great sense of concern and urgency when he talks to his tech peers, both in Israel and abroad because the tech community is already in a very difficult funding situation.
“The big tech companies are all tightening their belts, valuations are going down, and the recent blow up of the Silicon Valley Bank created some aftershocks in the entire financing system for startups,” Matus elaborated. “All of this is creating a very fragile environment already for startups here in Israel and on top of that investors of the VCs do not want to put their money to work in areas where the status of legal protection for IP and for ownership or civil rights could be up in arms.”
“There is a fear that Israel could become a pariah state, an isolated country that people don’t want to do business with. I really hope that’s not the case. But that’s a part of the discussion that’s happening right now.”
