Dollar, Shekel & Start-Ups

March 16, 2008 - 1:00 PM by

For all the Norte Americanos living in Israel who may have thought they were leaving the green of the red, white and blue behind, it’s just not so as we collectively eyeball the dollar in its continued free-fall.

Much of Israel’s (and the world’s) trade and commerce has historically been tied to the U.S. dollar; in Israel rents, property values and salaries have – until about six months ago – always been quoted in the $. A switchover to shekel quotes is rapidly becoming the norm but regardless, investors & businesses with money tied up in the U.S. are nervous.

How does the dollar dip affect Israeli start-ups? Israeli VC on Sand Hill Road addresses the issue:

For most Israeli’s, the dollar was always considered a very conservative and safe investment. Not anymore! In the past year, the dollar has lost ~20% of its value. Of course, there are always those who win and those who loose from these types of fluctuations. But for Israeli start-ups, this is not good.

Our companies have always prepared their budgets in US dollar. When the dollar weakens, it means that more cash will be used to make payroll, effectively reducing the time that a company has to operate. This means that it will require more capital to reach the same milestones as before, or in other words, makes it more expensive to operate.

Should start-ups convert dollars to shekels? Check out VC for advice…

Tags: • Category: Blogging, Business, Politics 

Comments

One Comment on Dollar, Shekel & Start-Ups

  1. David-Joe on Sun, Mar 16th 2008 1:34 PM

    2. The self esteem of a nation is reflected in its currency. This is because it directly affects all aspects of people’s lives. There was a time when those responsible for undermining a currency were executed by the king!

    Israel’s central bank governor has in the past several years been voted by his peers as the best “custodian of the currency”. A very prestigeous award.

    The erosion of dollar value is appalling, uneccessary and the grossest dereliction of responsiblilty. The Fed has pandered to spending whims during a period that has seen American governance reflect a banana republic attitude.

    To see the strength of the shekel gives me pleasure and if there is one country Israel should seek to join company with it is certanly not the United States, but Switzerland.

    The Swiss franc has long been a strong currency held high by an independent nation that understands why joining the European “Union” is not in its own rational self-interest.

    Israel copied the Swiss Defense Force’s call-up system, it should also do all it can to permanently mimick the Swiss policy of having the consistently strongest currency in the world.

    Hopefully Israel will one day break its fixation of thinking everything American is automatically good, not to mention its addiction to American aid money.

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