* Crucial tech sector hit by judicial reform crisis
* Startup funding falls 70%, emigration increasing
* Tech execs take lead in opposing reform
JERUSALEM, July 12 (Reuters) - A leading Israel investor on Wednesday predicted that the country's vital tech sector would recover quickly from its current funding downturn, in part by fighting a government judicial reform plan many blame for scaring away investment.
A key driver of economic growth in Israel, the tech sector saw its funding hit last year by the global economic slowdown.
But Prime Minister Benjamin Netanyahu's divisive bid to overhaul the judiciary this year has greatly exacerbated the crisis, tech leaders say. Funding raised by tech startups has fallen nearly 70% in the first half of 2023 while many new firms are registering overseas.
"We're going to overcome it and I think that the people that are trying to derail democracy today would be gone tomorrow," Erel Margalit, chairman of Jerusalem Venture Partners (JVP) and a former Labour Party lawmaker, said, referring to Netanyahu's ruling coalition of religious and nationalist parties.
"The big inventors are the warriors of democracy," Margalit told Reuters on the sidelines of a JVP Climate Tech conference.
Tech leaders including Barak Eilam, a former Israeli intelligence officer who now heads cloud-based software provider NICE and Eynat Guez, chief executive of Papaya Global, have been among the most vocal against the judicial legislation.
On Monday, parliament passed a key element in the bill, which aims to curb the power of the Supreme Court. In response, thousands on Tuesday blockaded Israel's main airport and highways.
Israel's shekel gained 1% versus the dollar on Wednesday while Tel Aviv shares jumped nearly 2% on a perception that Tuesday's protests were succeeding in pressuring the government. But the shekel remained some 7% lower over the past six months.
While the tech sector needs a stable Israeli economy, the economy needs a strong tech sector, which accounts for 14% of jobs and almost a fifth of gross domestic product. The fall off in tech funding has been a major factor in the weakening of the shekel, analysts say.
Margalit said there was still some funding available and that he had just raised "a lot of money for our companies", some at high valuations.
"Nothing is easy today and it's not the time where a lot of new investors are coming in by the thousands. But it's a time to keep your friends close," he said.
Israelis, he added, will continue to create startups but the main issue is where most of the workers will be - in Israel or abroad. (Reporting by Steven Scheer; Editing by Conor Humphries)
