Shekel squeeze: How offshore talent is keeping Israel's startup nation scaling upwards - interview

Israel's vibrant startup scene is facing a new challenge: a strong shekel that is squeezing liquidity for companies holding funds in foreign currencies. This economic pressure has led some prominent tech firms, like Wix and Elementor, to implement layoffs and reduce operations.

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One of the main concerns for start-ups when they are in their first stages is getting a strong team. And while artificial intelligence helps improve what each employee can do individually, many companies still need to contract people fast and know that they are capable of performing.

In response, many startups are turning to offshore talent to expand their development teams. Ami Goren, Israel Offshore country manager for ONE Offshore, explained that while cost reduction is a factor, the primary driver is the need to quickly contract capable personnel. His company specializes in connecting Israeli firms with teams in Eastern Europe, enabling them to scale their workforce efficiently.

This trend is also influenced by the desire to maintain continuous work, as offshore teams can operate on Fridays when many Israeli workers do not. Goren noted that although outsourcing can help stabilize salaries by aligning them with foreign currency funding, it's not a long-term fix. The global devaluation of the dollar means outsourced employees may eventually demand higher salaries in dollars, presenting a recurring challenge.

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For example, many companies hire people outside of Israel in order to continue work even on Fridays, something that most Israelis wouldn’t do. Of course, lower prices are a reason, but not the main one why companies contact us.

The strong shekel has caused the currency to fall below NIS 3 against the dollar for the first time in 30 years, significantly impacting companies with dollar-denominated income. This situation underscores the delicate balance startups must strike between rapid growth and economic headwinds.

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Even if they are paid in dollars, the American currency is devaluing worldwide. So the outsourced employees would eventually also ask for higher salaries in dollars, because it's a problem that also affects them.