Annual Report 2025
Israeli Tech Ecosystem
Editors: Yariv Lotan, VP of Product and Data; Einat Ben Ari, Senior Director Data and Insights, Tal Sibony Senior Manager Analytics and BI, Startup Nation Central
Data analysis and insights: Brad Hofman, Data Analyst; Royi Nahum, Business Analyst; Deema Wattad, BI Developer; Yanina Wainscheinker, Data Specialist; Startup Nation Central.
Featuring
Content
Foreword
Avi Hasson
CEO, Startup Nation Central
In 2025, Israel’s tech ecosystem aligned around a clear direction shaped by two forces. Artificial intelligence changed how value is created inside companies, while global and regional shifts determined where that value is scaled and realized. The data in this Annual Report shows how these forces moved from abstract trends to structural drivers of economic growth.
AI moved into the center of operations, raising productivity per employee, compressing development cycles, and accelerating the conversion of research into deployable systems. Companies delivered greater impact with focused teams, tighter execution, and deeper technological integration. This internal shift reshaped how Israeli tech engages with the world, making companies easier to integrate into enterprise platforms, infrastructure stacks, and security architectures. Strategic demand followed, reflected across funding patterns, exits, and acquisition activity captured in the data.
Regional engagement is evolving in parallel. Under the Abraham Accords, collaboration with Gulf Cooperation Council countries deepened through steady, execution-driven partnerships, with the United Arab Emirates emerging as a central gateway. Activity concentrated in applied technologies aligned with regional priorities, from food systems and water to industry, security, and infrastructure, reinforcing a model built on trust and long-term relevance.
Taken together, these signals describe an ecosystem recalibrated around productivity at home and demand abroad. AI defines how companies operate, while global and regional markets define where their capabilities matter most. The next phase will be shaped by alignment, as execution, integration, and durable partnerships translate innovation into lasting economic impact.
Executive Summary
Yariv Lotan
VP of Product and Data, Startup Nation Central
Israeli Tech Ecosystem 2025: Record-Breaking Maturation and Strategic Agility
In 2025, Israel’s tech ecosystem reached a definitive turning point, characterized by record-breaking exit activity and a structural shift toward a lean, high-productivity “Scale-Up Nation”. The foundation of the ecosystem has evolved to encompass not only startups but also private and public scale-ups, multinational corporations, and leaders in the defense industry. Despite persistent geopolitical challenges, the ecosystem demonstrated exceptional robustness, reinforcing its role as the primary engine of the Israeli economy and maintaining close synchronization with global capital trends.
Global Vote of Confidence: A Landmark Year for Exits and Public Markets
The year was defined by historic levels of liquidity and a reopening of the public market, signaling enduring global confidence in Israeli technology.
- Record M&A Activity and Market Dynamics – The total value of Mergers and Acquisitions (M&A) surged to an unprecedented $82.3B, representing a fivefold increase from 2024. This record figure was propelled by massive acquisitions, including Wiz ($32B), CyberArk ($25B), and Armis ($7.8B). Beyond these headline deals, the underlying market demonstrated robust activity with 157 total transactions.
- Global Vote of Confidence – This intense M&A activity signals a strong vote of confidence from leading global AI and cyber leaders, who are making their largest-ever acquisitions in Israel. These strategic investments further solidify Israel’s position as a crucial pillar in their global R&D and talent powerhouses. Furthermore, Israeli companies increasingly rely on inorganic growth achieved through acquisitions.
- IPO Channel Reopening: After a stagnant period, the IPO market restored meaningful scale. Offering values increased twentyfold to $2.2B, led by major US listings including Navan ($920M) and eToro ($710M).
- Surge in Public Funding: Beyond IPOs, public companies raised $10.4B, nearly eight times the 2024 value, driven largely by a sizable increase in convertible bond usage.
Private Funding Trends: Intensifying Dominance of Large-Scale, High-Quality Investments ("Flight to Quality")
Globally, the private sector was characterized by a concentration of capital, favoring fewer companies with larger, more high-conviction investments. Despite the unprecedented surge in billion-dollar funding rounds in the US, Israel’s tech ecosystem demonstrated impressive resilience against geopolitical and economic headwinds, all while maintaining a strong correlation with US market dynamics.
- Concentrated Capital Growth: Total private funding grew 32% to $16.7B, even as the number of funding rounds declined by 11% to 801.
- Rising Deal Benchmarks: The ecosystem demonstrated maturation, marked by a 62% increase in the median round size from 2024, reaching $9.7M. Concurrently, companies face higher hurdles and longer durations for raising capital.
- Mid-Stage Momentum: The “scale-up” transition was fueled by B-rounds, which saw capital investment increase by 84% (excluding the $2B Safe Superintelligence round), highlighting a healthy pipeline of growing firms.
- Mega deals (above $100M): A small number of very large financing rounds significantly shaped headline overall funding numbers. Mega rounds were the primary driver of capital in 2025, accounting for 51% of the total $14.3B reported funding, despite representing less than 4% of deals.
AI as the Ecosystem’s New Center of Gravity
Artificial Intelligence has moved from a vertical sector to a foundational layer re-architecting the entire Israeli tech stack.
- AI Dominance: Private funding for AI-related segments surged, with AI-first vertical applications accounting for nearly half of all AI companies.
- Sector Leadership: The Israeli ecosystem is dominated by business software and cybersecurity. Cybersecurity leads in talent and traction, fueled by geopolitical tensions, rising threats, and AI’s dual role. Business Software is the second-largest sector by funding and activity. Fintech, health tech, and industrial innovation are the next key sectors. Defense is a major growing sector, supported by mature local and global industry players.
- M&A Acceleration: AI-related M&A value more than doubled in 2025, with capital shifting toward vertical support applications that improve performance within established industries.
Economic Impact: Lean Excellence and Productivity Leaps
The high-tech sector solidified its position as Israel’s most resilient economic shield, achieving growth through technical excellence rather than sheer volume.
- Export Dominance: High-tech exports now account for 56% of Israel’s total exports, up from 52% in 2023.
- Productivity Gains: While high-tech GDP surged, total employment remained lean, indicating a major leap in productivity per employee.
- Strategic Talent Pivot: Hiring shifted decisively toward innovation and revenue-generating roles, with an 11% surge in Product, QA, and Data positions, while administrative roles were reduced.
State-of-the-Ecosystem: Primary Takeaways
- For Founders: The “chasm” at early stages has widened. Investors are demanding stronger fundamentals and clear milestones, leading to prolonged timelines between initial rounds and Series A (31-month median).
- For Investors: The market has bifurcated. While early-stage volume is contracting, the scale-up segment (Early Growth, Late Growth, and Mature tiers) is significant and rapidly growing, offering high-value opportunities for investors with high conviction.
- Areas for Attention: The innovation funnel is showing signs of contraction, requiring closer monitoring. This is evidenced by a continued reliance on a small group of frequent global partners, a narrowing sectoral focus on Cybersecurity and AI, fewer newly-founded companies, and a decrease in the total number of funding rounds across other sectors.
Ecosystem Landscape
In 2025, Israel’s high-tech private funding landscape saw an increase in funding with a decrease in the overall number of funding events, and an increase in average deal size. Compared with 2024, the estimated total capital raised grew by 32% from $12.7bn to $16.7B, while the estimated number of private funding rounds declined 11% from 897 to 801.
Public funding events rose 29% with a nearly eightfold increase in value from $1.3B to $10.4B. Initial Public Offering (IPO) value increased 22x, from $100M to $2.2B, marking a major reopening of the IPO channel in value terms. The number of IPOs rose by 11%, from 9 to 10, but only 3 of these IPOs were considered meaningful in scale. This highlights a small group of large listings accounting for most of the raised capital.The U.S. also experienced a boost in IPO (84%) but there were already some ramp up signs in the prior year.
In 2025, Israel recorded the highest merger and acquisition (M&A) activity in its history, with 157 transactions compared to 110 the previous year, and disclosed deal value rose nearly 5x from $15.5B to $82.3B. M&A exits increased 48% and total value rose 3x from $12.4B to $44B. In the U.S. M&A activity was also up in 2025 36% compared to 2024, but contrary to Israel the number of events was down by 13%.
Voices of the Ecosystem
Moshe Shalev
Co-Founder and Chief Product Officer, DecartAI
At DecartAI, we are an AI research lab at our core, with the goal of building an AI giant in Israel. We focus on building large-scale, proprietary models end to end, from optimization and architecture to inference, rather than layering AI features on top of existing products. Founded in 2023, we have scaled to more than 80 employees within a short period, driven by rapid progress in real-time generative video and perception models. We build the models ourselves, end to end, and expose them externally, that full ownership is what allows us to push real-time generative AI forward, and enable new, live, real-world-relevant use cases.
Operating at the frontier of AI comes with significant financial and organizational implications. Our fundraising journey has been shaped by the capital-intensive nature of training and serving advanced models, where infrastructure, compute, and elite research talent drive high ongoing costs. Early backing from leading global investors reflected conviction in our technological depth and long-term positioning, rather than short-term commercial metrics. In frontier AI, capital is not the hardest part, talent is. The real challenge is finding the people who can actually move the technology forward, and scaling our team has been more constraining than access to funding.
“In frontier AI, capital is not the hardest part, talent is. The real challenge is finding the people who can actually move the technology forward, and scaling our team has been more constraining than access to funding.”
Beyond Decart itself, I see a broader ecosystem challenge. Competition is a critical mechanism for expanding the AI talent pool: a dense concentration of ambitious AI labs pushes researchers to grow faster and raises the overall level of expertise. In my view, this competitive dynamic is still underdeveloped in Israel compared to global AI hubs, limiting the speed at which top-tier talent emerges locally. Technically, our differentiation lies in full-stack control and continuous optimization across cost, quality, latency, and scale, enabling real-time inference for generative video use cases that remain rare globally. Looking ahead, I believe these capabilities will extend beyond digital experiences into the physical world, particularly robotics, where real-time perception and generation will form a foundational intelligence layer. Israel’s strength in engineering and optimization provides a strong base, but sustaining leadership in AI-first companies will require deeper talent pipelines, stronger competition, and significant infrastructure investment, alongside continued integration with global AI ecosystems.
Private Funding
In 2025, Israel’s private tech sector raised an estimated $16.7B across 801 funding rounds, with a median round size of $9.7M. Compared to 2024, total capital raised increased 31% while the number of rounds decreased 11%. The median value increased 62% from $6M in 2024 to $9.7M. This shift indicates a maturing ecosystem and is consistent with the ongoing adjustment of global and domestic investment patterns, where capital is concentrated in fewer but larger transactions.
Comparing 2025 to 2024, the number of early-stage rounds decreased 6%, falling from 515 to 482, while total capital invested increased 16% from $3.7B to $4.3B. In early-stage funding, this boost came from a 48% rise in seed values from $920M to $1.4B. A-round value grew 6% from $2.7B to $2.8B (including the $1B Safe Superintelligence Round in 2024), and the number of rounds rose 12% from 115 to 129. This points to fewer but larger early investments, with seed activity leading growth in capital deployment.
The largest driver of growth was mid-stage funding, led by B rounds. Capital invested in B rounds more than doubled, rising from $1.3B in 2024 to $4.4B in 2025, with half of the value driven by the $2B Safe Superintelligence round. Excluding Safe Superintelligence’s round, capital invested in B rounds increased 84%. The number of deals also increased 10% from 50 in 2024 to 55. This further illustrates Israel’s maturing from a startup to a scale-up nation.
Late-stage funding value declined 24% from $3.26B in 2024 to $2.5B in 2025, alongside a 37% drop in the number of rounds from 27 to 17. This contraction signals investor caution at later stages, where higher risks and larger ticket sizes face greater scrutiny.
Global Comparison
For an objective comparison of Israel’s performance with other regions, only reported private funding metrics are considered, excluding any estimates and outliers.
From 2019 to 2025, funding and deal activity in Israel and the United States followed the same cycle, but 2024 to 2025 stands out as an outlier. Once US mega rounds are removed, both markets show a similar, moderate recovery after sharp corrections in 2022 and 2023. However, Israel recorded higher percentage growth in both 2024 and 2025, moving in the same direction as the US but with larger swings.
In 2025, US tech companies raised $330B in private funding, a 63% increase from 2024, with 28 mega rounds above $1B accounting for 39% of total deal value. Similarly, Israel’s private funding reached $14.2B in 2025, up 36% year over year while the number of rounds fell 13%, pointing to a selective market in which investors deploy larger checks into fewer Israeli companies.
Across regions, Asia, Europe, and Israel all follow the same global funding cycle, with growth in 2020 and 2021 and corrections from 2022. Asia’s funding events declined for three years and ended 2025 24% below 2024. Total funding declined 13% with only two mega-rounds recorded in 2025, accounting for 5% of the total deal value. Europe experienced four straight years of funding event contraction, declining 32% in 2025 from the previous year, while deal values were maintained at $68B. Four mega-round deals in 2025 contributed to 11% of total funding. Israel shows the biggest swings, with strong historical gains in 2020 and 2021, deep declines in 2022 to 2023, and a clear return to growth in 2024 and 2025.
Mega Round Analysis
A mega round is defined as any single funding round of at least $100 million. Between 2019 and 2024, mega rounds became an increasingly important driver of capital while maintaining a small share of overall activity. The mega round share of total funding rose from 30% in 2019 to 46% in 2024, despite accounting for only 1.8% of deals in 2019 and 2.5% of deals in 2024.
In 2025, reported funding reached $14.3B. Mega rounds accounted for 51% of this total, contributing $7.32B. Safe Superintelligence’s $2B round represented 14% of reported funding. Only 3.5% of transactions generated half of the capital, while more than 96% of deals were non-mega rounds sharing the remaining half, highlighting how a small set of very large financing shapes headline numbers.
Israel followed a similar trend to the US, where mega rounds represented 56% of total funding in 2025, up from 44% in 2024. Only 3% of transactions generated over half the capital.
The top private funding round this year was Safe Superintelligence’s $2B B round, just one year after their $1B A round and without a product release. Other notable rounds included Cyera with $940M raised in two separate rounds, Rapyd Financial Network which raised $500M, and Armis with $435M. There were five additional rounds at or above $200M.
Mid-tier private funding was driven by Quantum Machines $170M C round followed by Syremis Therapeutics $165M A round and 7AI’s $130M A round.
Early stage private funding was driven by Tenzai’s two seed rounds with a combined value of $75M, followed by Orchid Security and 7AI’s $36M rounds.
Here is a list of private companies that raised at least $0.5M in 2025:
Sector Analysis
Sector Funding Trends
Cybersecurity led 2025 funding with the highest median round size at $20M, followed by Fintech & Insurtech at $13M and both Industrial Technologies and Business Software at $10M, while Cybersecurity captured the largest total funding value at $4.7B (33%), ahead of Business Software’s $4.5B (31%). Health Tech generated the highest deal volume at 179 rounds, surpassing Business Software’s 157 and Cybersecurity’s 140 rounds. Cybersecurity combined large median rounds with strong total funding, Health Tech emphasized volume with smaller $4.5 million medians.
When analyzing mega rounds, Business Software and Cybersecurity together account for about three quarters of mega round funding (44% and 33% respectively). Aerospace & Defense, Fintech & Insurtech, Health Tech, and Industrial Tech each had only 2 or 3 mega rounds. Based on the share of active companies that raised mega rounds this year, Cybersecurity stands out with the highest reach (~2%), consistent with Israel’s positioning as a global cyber hub. While the other sectors have many active companies, relatively few are reaching mega round scale.
In 2025, Israeli private funding shifted toward Business Software, Cybersecurity, and Industrial Tech. Business Software’s share of total capital rose from 26% in 2024 to 31% in 2025, driven mainly by Safe Superintelligence’s $2B B round. Cybersecurity’s share decreased slightly from 36% to 33%. These two sectors combined accounted for two thirds of total funding. Fintech increased from 8% to 10% of total capital, Industrial Tech grew from 7% to 9%, and Health Tech declined from 15% to 9%, signaling a clear re-weighting away from health and toward software, security, and deep tech.
By deal count, the picture is more balanced but still points in the same direction. Between 2024 and 2025, Cybersecurity’s share of rounds rose from 15% to 18%, while Health Tech’s share fell from 27% to 23% and Business Software rose from 19% to 20%. Fintech’s share of rounds remained the same at 7%, and Industrial Tech declined from 10% to 9%, underscoring that growth in Business Software and Cybersecurity is driven by larger round sizes rather than a surge in the number of deals.
Sector Landscape Maps
Explore detailed maps of key players across sectors, offering a clear view of the major companies and innovations shaping each industry. Use them to understand the landscape and spot opportunities:
The Fundraising Journey
Time Between Rounds
Since our previous report, Startup Nation Central has refined its method for tracking the fundraising journey, improving accuracy across company cohorts and segments.
In 2025 the private funding landscape continued to reflect slower deal timelines, but larger median amounts, as investors prioritized startups with strong fundamentals and clear paths to scale.
- The time from a startup’s foundation to its first round (Pre Seed or Seed) remained relatively stable with a median of 15 months for companies who raised an initial round in 2025. The median amount of these rounds jumped significantly in 2025 from $3M in 2024 to $6M. Cybersecurity was the fastest with a 10 month median in 2025.
- The time between an initial round to an A round reached an all time high in 2025, with a median of 31 months making A rounds the longest to reach. The median amount also peaked at $16M, up 25% from 2024.
- The time between A and B rounds also reached an all time high this year, with a median of 27 months. The median amount continued the prior years’ upward trend and increased from $30M in 2024 to a new high of $38M in 2025.
Conversion to the Next Round
This new analysis tracks conversion rates for Israeli tech companies advancing through private funding stages from Foundation onward. It measures the share of companies completing a subsequent round or an exit within 12 or 24 months.
Historically, about a third of startups are able to raise funds within two years of foundation. In 2020, this rose to 39%, and peaked in 2021 with half of companies raising within two years of foundation and 38% within one year. Levels remained relatively high from 2022 to 2025 with ~46% of companies raising funds within two years. Cybersecurity consistently leads with the highest conversion rate, which has remained above 50% from 2023 to 2025. Business Software and Health Tech have relatively high success rates overall but have declined since 2024.
Conversion within two years of an initial round (Pre-Seed or Seed) to a subsequent round has weakened since 2022, pointing to growing hurdles in early scaling. One positive sign that may indicate recovery is the one year conversion rate for companies that raised an initial round in 2024, which rose to 11%.
Conversion from A and from B rounds demonstrates similar patterns with a notable decline from strong early levels. Rates stabilized at a moderate 20% to 23% through 2022 to 2024. This underscores heightened late-stage investor caution.
The drop in conversion from C rounds in 2022 was even steeper than from A and B rounds but has aligned with the conversion from A and B rounds in 2023 and 2024. In 2025, there is an upward trend in conversion within 12 months (which is anticipated to grow once a full 12 months have elapsed).
Scale-Up Analysis
Across the global tech industry, there is growing interest in the transition from a startup to a scale-up, with more attention being placed on how companies grow and sustain momentum over time.
There are no globally-applied definitions for a company’s growth classification based segmentation. Startup Nation Central developed an initial tiering framework to enable a view of company progression within the Israeli tech ecosystem. The methodology defines sample reference groups, including Early Growth, Late Growth, and Scaled-Up, to capture the journey of a company during its lifecycle within the Israeli ecosystem. Because most private startups and growth stage companies do not disclose financial statements consistently, , the framework classifies companies using growth ‘proxy parameters’ including headcount and employment trends, fundraising activity and age. Together, these tiers provide a practical approach for understanding organizational evolution from early growth through scale.
This is the first version of the methodology and it is expected to evolve over time. Startup Nation Central welcomes feedback and suggestions from ecosystem stakeholders to strengthen and refine future iterations.
Overall between 2022 and 2025, the total number of companies included in these growth-stage cohorts increased by ~50%. All three tiers expanded, showing continued company progression stemming from the peak funding period of 2021 through mid-2022. That period was meaningful for the ecosystem, and helped companies extend runway and scale. Early growth experienced a milder growth than the Late growth and Scaled-Up tiers.
The Cybersecurity, Fintech, and Business Software sectors are driving a disproportionately high share of growth companies compared to their overall presence in the ecosystem. Specifically, Cybersecurity is the most prominent, accounting for 19% of growth companies despite representing only 7% of the total ecosystem. Similarly, Fintech contributes 11% of growth companies while making up 6% of the ecosystem. In contrast, Health Tech’s presence among growth companies (11%) is significantly lower than its substantial overall share in the ecosystem (23%).
Public Companies’ Funding
Initial Public Offerings
The Israeli IPO market shifted sharply after the 2021 peak, when both the number of listings and their offering size were at their highest. Starting in 2022, meaningful IPOs, defined here as offerings above $50M, became increasingly rare. By 2023, the market reached its lowest point, with both the smallest number of listings and the smallest aggregate offering size. Most activity in this period consisted of small-scale listings on secondary exchanges in Canada (TSXV) and Australia (ASX), with Tel Aviv (TASE) also seeing only modest offerings.
In 2025, the trend reversed. The number of IPOs increased slightly, yet the overall offering size grew sharply, expanding by about 21x compared with 2024. Large US-listed transactions on NASDAQ and the NYSE, including Navan at $920M, eToro at $710M, and Via at $490M, restored meaningful scale to the market and reestablished major US exchanges as a primary venue for significant Israeli listings.
Follow-On Funding for Public Companies
Israeli non-IPO public fundraising experienced pronounced volatility between 2019 and 2025, while transaction volumes remained relatively stable, indicating that market swings were driven primarily by shifts in capital concentration per transaction rather than by changes in transaction activity.
In 2025, the market recorded a clear rebound in public fundraising volumes. Convertible bonds surged to $5B, up from just $0.1B in 2024, representing a 50-fold increase, and accounted for ~61% of non-IPO public funding. This marks a renewed reliance on convertible instruments not seen since the early pandemic period and following several years of marginal activity between 2021 and 2024. PIPE transactions also expanded materially, growing by more than 3x, while non-initial public offerings increased at a more moderate pace, rising roughly 2.4x.
At the transaction level, momentum was led decisively by convertible bonds. The number of convertible bond transactions more than doubled between 2024 and 2025, the strongest expansion among all non-IPO public funding instruments, highlighting their renewed centrality within the public market. Non-initial public offerings also expanded, with transaction activity increasing by 57%, while PIPE activity rose more moderately, growing by ~18%. Together, these patterns indicate that the 2025 reopening of the market was driven primarily by a sharp acceleration in convertible bond usage.
Market Performance
Finder NASDAQ Index
This analysis presents a performance comparison of two equal-weighted indices during 2025: the Finder NASDAQ Index, calculated by Startup Nation Central based on Israeli companies traded on NASDAQ, and the NASDAQ 100 Equal-Weighted Index. The equal-weight approach provides a more balanced view when index constituents vary widely in market size. To better align the Finder NASDAQ Index composition with the NASDAQ 100 Equal-Weighted Index and reduce volatility, the Finder NASDAQ Index applies a $50M market cap minimum threshold.
Across 2025, both indices delivered similar overall direction, ending the year higher than their January baseline. The Finder NASDAQ Index increased by about 15.3%, slightly outperforming the NASDAQ 100 Equal-Weighted Index, which increased by about 13.8%.
Despite the close year-end outcome, month-level performance differences were more pronounced. In April, the Finder NASDAQ Index rose by about 2.9%, compared to about 0.2% for the NASDAQ 100 Equal-Weighted Index. In June, the Finder NASDAQ Index gained about 6.7% versus about 4.4% for the benchmark, and in September it rose about 9.2% compared to about 4.7%. Conversely, November stands out as the sharpest divergence on the downside, with the Finder NASDAQ Index declining about 8.0%, while the NASDAQ 100 Equal-Weighted Index fell about 1.9%.
These episodes highlight that cumulative performance remains closely aligned, but the Finder NASDAQ Index experienced wider month-to-month swings relative to the 2025 benchmark.
Notable Public Companies
In 2025, the public Israeli tech landscape shows a clear sector-driven rebalancing shaped by AI disruption and heightened global security needs. Cybersecurity and defense-oriented companies dominated market capitalization and revenue scale, reflecting sustained demand for digital and physical security capabilities. Semiconductor and hardware-adjacent sectors also gained prominence, driven by the growing necessity for chips, compute efficiency, and advanced manufacturing to support AI workloads. In contrast, Software, Fintech, and consumer-focused sectors continue to generate meaningful revenue but face more conservative valuation treatment as markets increasingly prioritize infrastructure depth, earnings durability, and strategic relevance over pure growth narratives.
Here is a list of all publicly traded Israeli tech companies (on the various stock exchanges) updated daily:
Voices of the Ecosystem
Natti Ginor
Head of Israel Investment Banking, Jefferies
Jason Greenberg
Managing Director and Global Head of Technology M&A, Jefferies
Yosef Angster
Vice President, Israel Investment Banking, Jefferies
While the last few years have been challenging geopolitically for Israel, 2025 was a landmark year for M&A announcements, with 150+ deals and a cumulative transaction value of ~$82B. Three major transactions dominated the headlines: Google’s $32B acquisition of Wiz, Palo Alto Networks’ $25B acquisition of CyberArk, and ServiceNow’s $8B acquisition of Armis. These deals not only underscored the appeal of Israeli tech companies to global giants but also highlighted the country’s resilience during challenging times.
Importantly, even when excluding these mega-deals, the value of M&A announcements in 2025 reached ~$17B, surpassing previous record years such as 2024 ($15.5B) and 2019 ($16.4B). This demonstrates that Israel’s M&A market is not solely dependent on isolated blockbuster transactions but rather has developed sustained momentum supported by a broad base of deal activity.
Furthermore, Israeli tech companies remain attractive to both strategics and financial sponsors. Industry leaders such as Google, ServiceNow, Palo Alto Networks, MunichRe, Lenovo, Advent International, Thoma Bravo, and FTV Capital have all announced acquisitions of Israeli tech companies this past year. A key reason for this sustained interest is the global orientation of Israeli tech companies; the majority generate most of their revenues from outside Israel, which insulates them from the impacts of domestic instability and makes them appealing targets for global acquirers.
“From a global perspective, we are currently in the middle innings of the traditional 7-to-8-year M&A cycle where we would expect deal volumes to grow 2.5x from the trough in 2022 to their peak in the coming years.”
In addition to foreign acquisitions, the evolving maturity of the Israeli tech ecosystem is fostering outbound M&A activity. For example, Rapyd’s $610M purchase of PayU and NICE’s $955M acquisition of Cognigy exemplify this trend, signaling the rise of Israeli firms as active acquirers and not just targets. Notably, this year Jefferies advised Matrix on its merger with Magic, the largest public-to-public Israeli tech merger to date, forming one of the world’s largest IT services companies with a ~$3.4B market cap as of its signing announcement. This shift enhances Israel’s role in shaping global tech markets and encourages the development of larger, more competitive enterprises within Israel itself.
From a global perspective, we are currently in the middle innings of the traditional 7-to-8-year M&A cycle where we would expect deal volumes to grow 2.5x from the trough in 2022 to their peak in the coming years. Based on these historical patterns, and substantiated by an announced M&A backlog up 40% over a year ago, we are confident that activity levels will accelerate in 2026. Several key trends support this market outlook. The economy remains robust, equity markets are at all-time highs, debt costs are decreasing, and regulatory constraints are easing. PE funds are sitting on historic dry powder after four years of committing more capital than they have returned – the coming year adds pressure to both invest and return capital to liquidity-starved LPs. Meanwhile, the impact of AI on incumbents and emerging companies is clarifying, allowing market participants to move from trepidation to transacting. And these trends exist alongside US corporates sitting on substantial cash balances to pursue deals in the face of easing regulatory barriers.
Looking forward, global deal-making across VC-backed, PE-backed and traditional corporates will rise. Barring any major geopolitical disruptions, we expect a strong 2026 and a plethora of industry-defining transactions. As for Israel, the tech sector outlook in 2026 is highly optimistic. Stabilizing interest rates, lower inflation, and strong equity market performance. Coupled with an improving IPO market, Israel’s tech ecosystem is positioned for continued growth.
M&A Trends
All Mergers & Acquisitions
In 2025, total M&A value reached $82.3B, heavily impacted by three exceptional transactions: the acquisition of Wiz by Google for $32B, CyberArk by Palo Alto Networks for $25B, and Armis for $7.8B by ServiceNow. Excluding these deals, the underlying M&A value totaled $17.5B, continuing the strong recovery that began in 2024, when activity rebounded sharply toward 2021 peak levels, and extending it to a new high in 2025. Within this adjusted total, four large transactions, Next Insurance ($2.6B), Melio ($2.5B), Sapiens International Corporation ($2.5B), and Verint Systems ($2B), accounted for roughly 55% of M&A value.
Cybersecurity and Business Software led the M&A activity in 2025. Business Software had the highest number of companies acquired (48), which accounts for ~3% of the sector. Cybersecurity had the highest share of companies acquired at around 6%. There was also elevated M&A activity in Aerospace & Defense with 4% of companies acquired in 2025.
Overall, after strong normalization in 2024, 2025 reinforced the upward momentum, combining record headline value with sustained deal flow and continued concentration in a small number of large acquisitions.
M&A Exits
In 2025, M&A Exits accounted for 89% of all M&A events and 53% of the total M&A amount.
After a subdued 2023, the value of M&A exits rose sharply in 2024, increasing by 2.5x compared to 2023. In 2025, exit value decreased by ~3% year over year.
Despite this decline in value, the number of exits grew substantially with an increase of about 47% from 2024 to 2025. This combination lowers the total value, but significantly more deals indicates a market shift toward frequent but smaller exits. Acquirers appear to be prioritizing capability-driven or strategic add-on acquisitions, while being conservative on pricing.
Median M&A Amount
M&A median values follow a clear year-on-year pattern shaped by deal size mix and sector behavior. From 2019 to 2021, the median increased steadily as medium-sized deals ($100M–$1B) expanded sharply, lifting the midpoint. In 2022, this momentum eased as the share of mid-sized deals declined and smaller transactions gained weight. The trend resumed in 2023 and peaked in 2024, when renewed concentration in mid-sized deals temporarily pushed the median to $200M.
In 2025, the distribution reset. The share of mid-sized deals declined significantly, while small deals increased and large deals grew. Despite higher overall deal volume, this broader shift toward smaller transactions pulled the median back to $100M, reflecting normalization in deal mix rather than weaker buyer demand.
In 2024, Israeli tech acquisitions were concentrated around mid to high-priced transactions, resulting in the typical deal being priced unusually high. In 2025, the market was more active, but also more polarized: deal volume expanded through more transactions below $150M, while a small number of mega acquisitions above $1B captured much of the year’s total value.
The median amount for Cybersecurity acquisitions was 50% above the ecosystem median ($150M vs $100M), while the Business Software median was 40% lower than the ecosystem median ($60M), partly driven by acquisitions of earlier stage AI companies.
M&A Deep Dive
Time to M&A Exit
Israeli tech acquisition exits follow a fairly consistent rhythm, with the typical company reaching its first acquisition after about six to seven years. The pace did slow as the median stretched in 2022 and 2023, then reset back to shorter timelines in 2024. In 2025, the median edged up to 6.5 years, pointing to a year where the acquisition mix leaned toward established companies, enough to nudge the midpoint higher without changing the broader pattern. Overall, the story is one of stability, punctuated briefly by longer paths to acquisition and then a return to the baseline.
Global vs. Local Acquirers
In 2025, Israeli acquirers were responsible for 38% of all acquisitions by volume, but these transactions represented only 2% of the total acquisition value. Even after excluding the ultra-mega deals (Wiz, CyberArk, and Armis), the domestic share of the total acquisition amount reached only 9%. This clearly demonstrates that while domestic buyers are more active in completing smaller deals, the overall 2025 M&A landscape remains predominantly foreign-led.
Notable Acquisitions and Acquirers
Top M&As
In 2025, Israel’s technology M&A landscape was shaped by a small number of very large transactions led by global strategic and financial buyers. The headline deals, Google’s $32B acquisition of Wiz, Palo Alto Networks’ $25B purchase of CyberArk, and ServiceNow’s $7.8B acquisition of Armis, highlight continued global interest in Israeli cybersecurity leadership. Additional high-value transactions included Munich Re’s $2.6B acquisition of Next Insurance, Xero’s $2.5B purchase of Melio, Advent International’s $2.5B acquisition of Sapiens International Corporation, and Thoma Bravo’s $2B deal for Verint Systems, which together accounted for 12% of the total M&A amount. Taken together, these deals represented the vast majority of total M&A value in 2025, pointing to strong value concentration at the top end of the market.
Notable Acquirers
The 2025 acquisition landscape reflects a clear variety of buyer types and strategies. Israeli strategic acquirers, led by Check Point Software Technologies and Wix, continued a pattern of steady, repeat acquisitions, primarily at small to mid-size deal levels.
Global strategic buyers dominated overall deal value, driven by large transactions by Google and Palo Alto Networks, alongside consistent activity from enterprise platforms such as Salesforce, Apple, Amazon, Qualcomm, and Dell Technologies.
A distinct defense and industrial-focused consolidation strategy emerged with Ondas Holdings, which led 2025 by transaction count rather than deal size. Among financial buyers, Apax Partners stood out as a globally active fund executing large-scale investments, while Thoma Bravo reinforced its role as a large-deal acquirer, concentrating capital into fewer, high-value transactions.
Voices of the Ecosystem
Ido Vigdor
Managing Partner, Viola Credit
The Israeli tech ecosystem has a well-developed venture capital infrastructure supporting early-stage innovation. Less developed, though rapidly evolving, is the credit ecosystem, a complementary funding source that serves growth in highly targeted ways.
Credit doesn’t replace equity; it supplements it. Once companies move beyond technology risk, where the question isn’t whether the technology works, but how to scale it, and achieve product-market fit with demonstrated execution capability, debt financing becomes relevant. Viola Credit recently closed a $2 billion fund focused on this space, bringing its total assets under management to $4 billion globally.
The opportunity is substantial. In the United States, debt represents roughly 20% of every dollar invested in technology companies. In Europe, that figure drops to 5-6%, and in Israel it sits between 5-10%. This gap represents enormous potential as the ecosystem matures.
Growth lending addresses specific use cases: financing acquisitions, funding capital expenditures for hardware-intensive businesses, or supporting customer acquisition in B2C companies with strong unit economics. In 2025, we financed several Israeli tech companies pursuing tactical acquisitions, not transformative mergers, but strategic purchases to fill product gaps or acquire state-level regulatory licenses.
Our asset-backed lending practice focuses heavily on fintech companies generating financial assets, loans, receivables, and credit products that can be efficiently financed. This $2 billion fund specifically targets this segment, requiring deep expertise in credit underwriting, not just technology evaluation. With a 45-person team spanning New York, London, and Tel Aviv, we’ve built domain expertise across different asset classes, supporting portfolios in ten countries.
“Growth lending addresses specific use cases: financing acquisitions, funding capital expenditures for hardware-intensive businesses, or supporting customer acquisition in B2C companies with strong unit economics.”
Israeli fintech exemplifies the sector’s evolution. Companies like Melio, Lendbuzz, and Tipalti have built substantial businesses, yet Israel hasn’t produced a $10 billion+ fintech. I believe that milestone will emerge within the next decade as the ecosystem matures.
For entrepreneurs, the threshold is typically $15 million in revenue and above. At that stage, with proven technology and business model, debt becomes a strategic tool preserving founder ownership while funding growth. We’re seeing encouraging signs entering 2026: new Israeli fintech formation is accelerating, our average ticket sizes grow year-over-year, and American venture funds are significantly increasing their Israeli presence. The ecosystem is shifting from “Start-Up Nation” to “Scale-Up Nation”, and that transformation requires founders who understand that how you finance growth matters as much as what you build.
Boaz Lifschitz
Co-Founder and Managing General Partner, Peregrine VC
At Peregrine, our long-standing focus on health tech stems from deep operational experience, with broader impact emerging naturally over time. Having built and backed medical startups myself, I strongly believe in partnering with founders from the earliest stages and supporting them through long, capital-intensive development cycles. We like to work with entrepreneurs from the very beginning, from the moment there is just an idea, and accompany them all the way. This approach has remained consistent since the fund’s inception, even as our sector mix has evolved.
Over the past decade, at Peregrine, we have expanded beyond traditional implantable medical devices toward oncology, therapeutics, and digital health, while remaining cautious in areas where business models and reimbursement paths are unclear. Over the past two to three years, funding constraints have become the dominant challenge for medical startups worldwide and also in Israel, driven by a combination of global market corrections, weak post-IPO performance of the 2020-21 cohorts, domestic political uncertainty, and the impact of war. At the same time, extended development timelines and regulatory requirements continue to demand capital discipline and patience in an industry with no shortcuts.
In recent months, we have started to see a positive momentum emerge. International strategic players are increasing their investments and acquisitions in Israel, and we are also beginning to see investment activity from both foreign and Israeli venture firms. I anticipate a meaningful increase in medical investments in 2026.
When it comes to AI, I view adoption as inevitable but uneven across subsectors. While AI is already transforming drug discovery and digital health through faster modeling and experimentation, its penetration into core medical devices remains more gradual. In pharma, AI already provides enormous advantages, modeling molecules, testing thousands of variations, and that acceleration is very real. We expect device innovation to increasingly benefit as computational tools deepen their role in physiology and design.
“While AI is already transforming drug discovery and digital health through faster modeling and experimentation, its penetration into core medical devices remains more gradual. In pharma, AI already provides enormous advantages, modeling molecules, testing thousands of variations, and that acceleration is very real. We expect device innovation to increasingly benefit as computational tools deepen their role in physiology and design.”
Addressing diversity in the ecosystem, at Peregrine, we acknowledge a modest increase in the number of female entrepreneurs in health tech, but progress is still far from sufficient. Meaningful change must start much earlier in the pipeline, long before company formation. As part of this effort, we regularly bring groups of high-school female students into our offices, exposing them firsthand to startups, investors, and the technology innovation environment. Early exposure, in my view, is critical to expanding the future pool of founders and leaders in the tech ecosystem.
Despite the near-term challenges, I remain optimistic about Israel’s entrepreneurial pipeline, pointing to a post-war rebound in company formation and Israel’s enduring global edge in execution efficiency. Strategic acquirers are often amazed that Israeli companies reach clinical results with half the capital it would take in the US. Sustaining this advantage will require disciplined capital allocation, long-term thinking, and continued investment in talent development.
Investor Trends
Number and Origin of Investors
Investor participation in Israel’s high-tech sector peaked in 2022 at 513 Israeli and 950 global investors. Declines began in 2022 because of global recessionary pressures, followed in 2023 by sharp drops of 37% for both Israeli and global investors, caused mainly by rising interest rates and reduced liquidity. From 2024 to 2025 participation fell further by 17% in Israel and 31% globally due to geopolitical tensions and capital concentration.
Fewer investors are deploying larger capital per deal, targeting later-stage rounds and strategic acquisitions, and showing strong conviction and capacity to support substantial deals, including major exits and public listings.
This evolution marks a shift from “startup nation” to “scale-up nation,” with focus on resilient sectors offering stable returns despite volatility. The record-high funding sizes in 2025 reaffirms the search for quality over quantity.
Global Participation
The participation of global investors in funding rounds saw a fluctuation: after dropping from 62% in 2023 to 52% in 2024, it recovered in 2025, reaching 58%. Despite the 31% drop in the total number of global investors in 2025, those who were active increased the individual investment volume.
Notable Investors
Local Investors
The Israeli investor landscape in 2025 was characterized by a core of repeat backers. A small cluster of leading venture funds accounted for a high share of total rounds, reflecting their role as anchor investors that support portfolio companies across multiple stages. Leading investors are iAngels with 28 rounds and 10 first time rounds, followed by TLV Partners with 22 rounds and 14 first time rounds.
Mid tier investors add depth to the ecosystem, typically participating in a moderate number of rounds while maintaining a balanced mix between follow on and first time investments. This cluster is led by Cerca Partners with 11 total rounds, 7 of which are first time, followed by VentureIsrael and Hetz Ventures, each with 11 rounds. In parallel, a distinct group of accelerators, seed funds, and public or strategic investors directs most or all of its capital into first time rounds, lifting new company financings to nearly half of recorded activity.
This structure supports a maturing ecosystem in which total rounds are increasingly concentrated in experienced, high conviction platforms, while first time rounds are spread across a broader base of early stage investors that focus on sourcing, building, and de-risking the next generation of Israeli tech companies.
Here is a list of all local investors in 2025:
Global Investors
NFX Capital and Insight Partners emerge as the most active global investors in Israeli tech in 2025, with 27, and 18 total rounds respectively. They have a strong tilt toward first time participation. Together with Bessemer Venture Partners, Lightspeed Venture Partners, Ibex Investors and Israeli Mapped in NY Ventures , these companies have repeated exposure to Israeli companies. These investors form a group that invests in more than 3 rounds and represents roughly 7% of all global investor rounds, while global investors participating in fewer than 3 rounds account for about 93% of activity. More than 395 additional international investors, corporate venture arms, and multinationals contribute only one round each, underscoring that Israel’s global capital base is highly diversified yet anchored by a relatively small set of frequent, high conviction partners focused on enterprise software, cybersecurity, fintech, and infrastructure.
Here is a list of all global investors in 2025:
Israeli VC Funds
Between 2023 and 2025, Venture Capital (VC) raising in Israel’s tech ecosystem remained broadly stable at ~$2.4B in 2023 and $2.5B in 2024, then increased to $4.3B in 2025. This trajectory indicates that, despite a cautious funding environment, the ecosystem is attracting larger funds and building deeper pools of structured capital to support scaling companies through volatile regional and market cycles.
Leading the VC fundraising is CyberStarts ($680M) based on 2 funds. Notable mentions include Glilot Capital Partners ($500M), Greenfield Partners ($400M) and Red Dot Capital Partners ($320M).
Also noteworthy is Viola Credit, which announced a new $2.35B fund. However, this fund is designated for providing credit to startups, not for equity investments (and hence not included in the analysis).
Economic Indicators & Impacts
The following analysis of the Israeli high-tech ecosystem’s economic indicators in the first three quarters of 2025, was performed by Startup Nation Central in collaboration with the Aaron Institute for Economic Policy. It is based primarily on data from the Central Bureau of Statistics (CBS) and helps illuminate the ecosystem’s economic impact trends. It is important to note that CBS employment data in this chapter includes only high-tech employees located in Israel and that this data lags by one quarter. This analysis is distinct from Finder’s global employment data, which includes Israeli tech company employees worldwide (and does not have a lag).
Special thanks to Dr. Sergei Sumkin, Senior Researcher at the Aaron Institute for Economic Policy, for his valuable contribution.
Contribution to GDP and Exports
During the first three quarters of 2025, Israel’s high-tech sector solidified its role as the primary engine of national economic growth, outperforming the broader economy even under the pressures of war. The sector’s success during this period was defined by a shift toward increased efficiency and output per employee as productivity gains took center stage over headcount expansion.
This trend toward high performance is evident in the sector’s global dominance, with high-tech exports now accounting for 56% of Israel’s total exports, up from 52% in 2023. While high-tech GDP surged between 2023 and 2025, the total number of employees decreased 0.7% compared to 2023 and grew by only 1.5% in 2025, indicating a leap in productivity. The dollar value of contribution per employee to exports surged to 3%, nearly double 2023’s contribution. GDP contribution per employee increased 1.4%, significantly outpacing the 0.7% decline in total employment since 2023.
Local Employment Trends
By the third quarter of 2025, Israel’s high-tech landscape transitioned to a leaner, more mature workforce structure. The primary driver was a 11% surge in hiring for Product, Quality Assurance (QA) and Data roles. Companies prioritized innovation and revenue-generating roles over traditional corporate overhead.
There was an increased demand for data infrastructure, including data pipelines, cloud architectures, and secure connectivity. Demand stems from AI proliferation and defense-driven workloads. The growth in specialized engineering points to expansion in systems integration, hardware-adjacent tech, and simulation or modeling for deep tech, pharma, and resilient infrastructure.
Research and Development (R&D) remains the bedrock of the industry, comprising nearly half of the high-tech workforce, with a 4.3% employee increase during the period. Companies are maintaining core engineering capacity while reallocating toward productization, reliability, and data-heavy roles that convert R&D into deployable products. Software developers declined due to efficiency gains from modern tooling, cloud platforms, and AI-assisted coding. Advances in tooling and automation allow fewer engineers to ship and maintain greater feature volume, lowering marginal demand for generalist roles.
In parallel, AI and data workloads boost demand for data engineers, DBAs, cloud/DevOps specialists, and network engineers. These roles design data architectures, pipelines, and networks, signalling a rebalancing away from pure software development toward data, infrastructure, and applied engineering.
The sector also realigned with a 10% reduction of business and administrative positions. This highlights a strategic pivot toward leaner operational structures that favor technical efficiency over headcount, at least partially driven by AI adoption.
Employment by Israeli Tech Companies
Startup Nation Central’s Global Employment Indicator provides a comprehensive view of Israel’s high-tech workforce by aggregating professional employment data from over 5,000 Israeli-founded companies worldwide. The Indicator complements official CBS figures by capturing the global footprint of Israeli startups and scale-ups, including employees based abroad.
According to the data, the industry hit its lowest point in Q3 2024 with 592k employees. By the start of 2025, the sector regained momentum, entering a “sprint” phase where employment grew by 1.6% in Q1 and a further 2.8% in Q2, peaking at 623k. While CBS data for Q4 2025 has not yet been released, historical comparisons show consistent directional alignment between the two measures, with the global dataset typically displaying smoother trends and lower volatility than local employment figures.
Headcount in the latter half of 2025 decreased slightly to 619k in Q3 (-0.5%) and 611k in Q4 (-1.3%), reflecting deliberate “thinning” of the ranks to favor technical excellence over sheer volume. This reflects a strategic reshuffling to prioritize bringing solutions to market. Firms also rationalized their overhead, leading to a contraction in traditional R&D roles and a decline in administrative and HQ positions.
By the end of 2025, tech roles accounted for 16.3% to 16.4% of the total Israeli workforce. While the total headcount eased slightly at the end of the year, the sector emerged stronger and more efficient. By maintaining stable wages while increasing the value of exports per worker, the industry successfully recalibrated itself to remain the nation’s most resilient economic shield.
Ultimately, the easing of employment numbers signals healthy recalibration: the industry has transitioned from a growth to technical excellence and long-term sustainability.
The AI Stack from Verticals to Infrastructure
Voices of the Ecosystem
Shani Ankorion
Consulting Managing Partner, Consulting, EY Israel
The AI implementation landscape has shifted dramatically. After a year of promotional experimentation, enterprises are discovering that moving from pilot to production presents challenges nobody anticipated, and the rules of engagement have fundamentally changed.
EY’s recent research with universities and clients worldwide identified four possible AI futures: transformation, linear growth, regulatory constraint, and monopolistic collapse. The reality? We’ll experience all four simultaneously across different sectors. But here’s what matters for execution: enterprises initially believed AI would drive back-office cost savings. Now they understand it must solve their hardest problems, core business challenges, particularly revenue growth.
“Questions around data governance, responsible AI frameworks, and how to even test systems that produce different results each time remain largely unanswered. The notion of managing hybrid teams, humans working alongside AI agents, lacks established practices entirely.”
This creates both opportunity and obligation for Israeli tech companies. Your traditional advantages, hunger, fearlessness, exceptional talent forged in real operational environments, remain powerful. But what enterprises now demand is different: sector-specific business insight. They want partners who understand their business problems and processes before proposing technology solutions. Too many startups still lead with technology looking for problems.
The implementation paradox is stark. Development speed has accelerated, what took a year now takes a quarter. But testing and validation? That now takes exponentially longer. Questions around data governance, responsible AI frameworks, and how to even test systems that produce different results each time remain largely unanswered. The notion of managing hybrid teams, humans working alongside AI agents, lacks established practices entirely.
For investors, differentiation will come from companies combining vertical domain expertise with AI capabilities. For multinationals, building AI strategy and data governance frameworks now, before regulation forces reactive compliance, is imperative. For entrepreneurs, the mandate is clear: understand the business problem deeply, then architect the AI solution.
The AI Classification Schema
This chapter is based on a classification schema applied by Pitchbook to global tech companies and by Startup Nation Central to Israeli tech companies. The classification categories are determined by a product’s position in the AI stack, from end-user applications to enabling platforms and deep tech foundations, and how central AI is to the product:
- Vertical Applications, AI-First: AI is the core engine of an industry-specific product and the primary source of differentiation.
- Vertical Applications, Support: AI augments existing industry workflows, improving performance inside established processes.
- Horizontal Platforms: Cross-industry infrastructure and tooling that enable others to build, deploy, and operate AI.
- Autonomous Machines: AI applied directly to physical systems such as robotics and autonomous technologies.
- Semiconductors: Compute and hardware foundations that support AI training and inference.
Local & Global AI Segmentation Landscape
By company share, the AI ecosystem is application-led. Vertical Applications, AI-First companies account for about half of all AI companies, and Vertical Applications, Support accounts for about 27%, pointing to a market shaped by faster product cycles and clearer routes to adoption. Horizontal Platforms represent 15% of AI companies, signaling rising shared infrastructure needs as AI development scales. Autonomous Machines and Semiconductors represent 6% and 3% respectively, as these companies require deeper capital and longer development timelines that naturally constrain company formation.
In both Israel and global markets, Vertical Applications dominate company formation and deal volume, while Horizontal Platforms capture most value. Israel exhibits a clearer divide, with Vertical Applications, AI-First driving activity, and value concentrating mainly in Horizontal Platforms and, for M&A, in Vertical Applications, Support.
- Most AI companies in Israel are vertically focused, accounting for 76% of the ecosystem. Nearly half are classified as Vertical Applications, AI-First. While this group represents a similar share of funding events, it captures only 27% of total funding value, reflecting smaller average rounds. The same pattern appears in exits: these companies account for 36% of AI M&A events but only 9% of total M&A value, pointing to earlier-stage and lower-value acquisitions.
- Horizontal Platforms represent only 15% of AI companies yet capture 56% of funding value and 52% of M&A value due to much higher amounts per event.
- Israel’s AI funding reflects global trends, with Horizontal Platforms capturing a dominant share of capital, consistent with the majority of AI investment worldwide.
- While in Israel AI Semiconductor companies did not generate significant M&A volume, globally they are dominant in the M&A scale.
AI Funding & M&As Trend
Private funding across Israel’s AI segments expanded in 2025, with reported capital rising 78% even as funding events declined 11%, a sharper divergence than the broader ecosystem, which saw 35% capital growth alongside a 13% drop in events. Within this trend, Vertical Applications, AI-First recorded a 14% decline in deal count while disclosed funding nearly doubled, reflecting a shift toward fewer, larger rounds. Horizontal Platforms strengthened further, posting growth of 6% in events and 79% in disclosed funding, signaling sustained investor appetite for core AI infrastructure.
In 2025, AI M&A activity in Israel accelerated sharply, with total events increasing by almost 3x and disclosed value rising by 9x, but this jump was mainly driven by a small number of mega deals. Three transactions, Armis ($7.75B), Next Insurance ($2.6B), and Sapiens ($2.5B), together total $12.85B. This comprises about 79% of Israel’s disclosed AI M&A value in 2025, and a central reason the year scaled so dramatically in value. This concentration is especially visible in Horizontal Platforms, where Armis alone represents about 90% of the segment’s disclosed M&A value ($7.75B out of $8.6B). This explains why Horizontal Platforms showed the clearest value acceleration relative to activity, with events up by 2.3x while disclosed value rose by 17x. By contrast, Vertical Applications, AI-First expanded by about 3x in event count, but disclosed value increased only 8%, pointing to broad appetite for many focused products, often at smaller deal sizes. Vertical Applications, Support scaled in both events by 3.5x and in value, consistent with growing buyer demand for enterprise enablement and operationalization layers.
Financial Stability Insights
The assessment of business risk, financial stability, and sectoral resilience was conducted by Dun & Bradstreet Israel, drawing on proprietary credit risk models and company-level data across the Israeli business ecosystem. Special thanks to Ronny Alpern, VP Data and Uri Iskovich a Data Analyst from Dun & Bradstreet Israel Research and Analytics Team for their contribution and insights.
Credit Risk Score
Dun & Bradstreet Israel assigns each company and business entity a financial risk score ranging from 0 to 100, indicating the probability of financial failure over the next 12 months, with lower scores signaling higher risk. This forward-looking model covers the full economy and provides a consistent benchmark for assessing financial resilience and stability. Definitions of technology companies and sub-sector classifications may differ from those used by Startup Nation Finder.
Viewed through this lens, Israel’s high-tech sector shows consistently stronger financial fundamentals than the broader economy. Since 2020, the average Dun & Bradstreet score for the overall economy has held near 32, while high tech has maintained a higher average of about 38. This sustained gap points to a structurally stronger risk profile for technology-driven companies, even across extended periods of macroeconomic and geopolitical pressure.
According to D&B Israel’s analysis, a clear shift emerged starting in the second quarter of 2024. The strengthening in credit risk scores reflect less uncertainty, enabling a gradual return to more stable economic activity and forward-looking business planning.
This momentum strengthened through the second half of 2024 and into the first half of 2025. Dun & Bradstreet links part of the improvement to changes in the security environment, including developments during the Iran-Israel war, which supported greater market confidence in the economy’s capacity to manage external risk. As risk premiums eased across key sectors, financial indicators improved steadily. Both high tech and the broader economy benefited from this shift, with high tech maintaining stronger overall financial stability.
Credit Risk Score Comparison by Sector
A closer view of high-tech sub-sectors shows clear differences in financial resilience. Cybersecurity continues to lead, with average Dun & Bradstreet scores reaching about 42 in 2025, supported by strong business fundamentals and sustained global demand. Defense-related technologies also show steady improvement, with scores rising to around 39.
After earlier declines, fintech and gaming display signs of recovery. Fintech scores increased to roughly 37, while gaming stabilized at slightly lower levels, reflecting improving yet more moderate resilience compared with leading sub-sectors. In contrast, the broader economy remained at a lower stability level, with average scores near 32, reinforcing the persistent gap between technology-driven industries and the wider business environment.
Together, these patterns indicate that while macroeconomic and security-related pressures affect the entire economy, high tech, especially its strongest sub-sectors, maintains a greater capacity to absorb risk and recover over time.
Regional Economic Opportunities
Voices of the Ecosystem
Isaac (Yitz) Applbaum
Chairman, Kinetica
We have been leading early-stage investing in defense technology, and the momentum is unmistakable. With a small team we have already made several early investments, and interest is coming from Germany, the United States, Japan, and the Emirates. The UAE in particular has become a natural entry point to the wider Arab world.
What stands out in every conversation is that Israeli technology delivers. Partners see systems that work, that can be deployed immediately, and that bring real operational value. In the region, the conversation rarely stops at purchasing a product. There is a growing focus on owning IP, building local expertise, and developing capabilities together. The model often moves from a simple sale or license to a deeper partnership, where a new solution is co-developed for regional needs, with shared IP and shared commercialization. It is a broader opportunity than most people appreciate, and both the demand and the appetite for collaboration are unmistakable.
These partnerships are built on trust. This is work that depends on personal relationships, on people who understand the ecosystem, speak the language, and have earned confidence through years of engagement. As normalization advances, these relationships will play a significant role in strengthening regional cooperation. The receptivity across the Gulf is real.
“As normalization advances, these relationships will play a significant role in strengthening regional cooperation. The receptivity across the Gulf is real.”
Defense technology now represents a major opportunity for Israel’s resilience and independence. Its scale is approaching what cyber became in previous years. We are looking at a $100B in Israeli exits in the next five years, with strong interest from Japan, Germany, Saudi Arabia, and the Emirates. In this space, personal relationships and cultural fluency matter, and they often determine who becomes a long-term partner. This is where Israel’s ingenuity, engineering talent, and collaborative mindset create real strategic value.
Deal Activity Trend and Capital Scale
The data is based on publicly disclosed funding rounds and reflects the overall size of rounds in which investors from the Middle East and North Africa (MENA) region participated, rather than the capital they invested directly. As with most market data, some activity remains outside public visibility, with investments often routed through international venture funds or intermediary vehicles.
Within this context, deal activity remained relatively steady even as funding volumes rose and fell. Funding followed a familiar global pattern, peaking in 2021, declining through 2024, and beginning to recover in 2025. Investor engagement, however, did not decline at the same pace, indicating that participation was sustained through ongoing deal activity rather than driven by large capital commitments.
Across deal volume, consistency over time, and ticket size, the United Arab Emirates stands out as the primary investment corridor within the MENA region. UAE-linked investors participate steadily across funding years and stages, positioning the country as the central gateway for Israeli tech engagement with the region. Other markets, including Morocco and Bahrain, appear more selectively and at smaller scales. Their activity reflects early-stage ecosystem connections rather than established capital channels, highlighting the asymmetric structure of current regional engagement.
Investments Activity and Patterns
Signed in 2020, regional engagement between Israel and parts of the Middle East and North Africa (MENA) has expanded, opening new channels for trade, investment, and innovation. In high tech, normalization translated into gradual engagement rather than immediate capital inflows. The data points to a measured integration process, marked by relatively steady deal activity even as funding volumes fluctuated sharply from year to year.
Investor participation reflects deliberate entry and relationship building rather than short-term market cycles. Activity is highly concentrated, with about 20% of investors accounting for more than 50% of all recorded rounds. This pattern indicates that engagement is shaped primarily by repeat participation instead of one-off investments.
MENA-linked investments remain concentrated in early funding stages and smaller rounds, signaling a cautious, exploratory approach focused on learning and optionality rather than rapid scale.
At the sector level, Agriculture and Food Technologies lead activity, representing over 21% of all rounds. This focus aligns closely with regional priorities across MENA, such as food security, climate resilience, and water efficiency, where Israeli technologies offer applied, near-term solutions. Cybersecurity, Aerospace, Defense and HLS, and Industrial Technologies follow, reflecting diversified interest across strategic domains.
Taken together, the sector and stage mix suggests that regional investors prioritize early engagement in areas tied to national and regional challenges, using investment as a tool to build familiarity, test relevance, and lay the foundation for longer-term collaboration.
Indications Going Forward
The data suggests that the impact of growing engagement between Israel and the MENA region on Israeli high tech is shaped less by capital scale and more by continuity of engagement. Investment activity reflects a gradual integration process, characterized by repeated participation and early-stage involvement rather than rapid capital expansion.
This dynamic extends beyond investment alone. Trade data between Israel and MENA markets, particularly with the United Arab Emirates, points to sustained commercial relations that form a broader economic context for technology collaboration. The connection between active trade and technology investment indicates that cooperation is developing within a wider economic framework, supporting trust-building and the deepening of long-term partnerships.
In parallel, traffic data from MENA countries shows consistent and intentional engagement with the Finder platform, with users actively exploring company profiles, investor pages, and search functionalities. This indicates that engagement with Israeli technology is unfolding across multiple layers of investment, trade, and market exploration, laying a durable foundation for deeper economic and technological collaboration over time.
The Israeli tech ecosystem has undergone a significant structural transformation, evolving from a high-volume startup hub into a more mature, scale-up-oriented market. While the total number of investment events decreased, the focus shifted toward high-conviction deals and larger individual transactions. This “flight to quality” highlights an environment where investors prioritized companies with proven fundamentals and clear paths to scalability.
Sectoral leadership remained concentrated in cybersecurity and business software, particularly those leveraging artificial intelligence. Cybersecurity solidified Israel’s position as a global hub, attracting landmark acquisitions from international strategic players. The public markets also showed signs of renewal, with a notable return to major global exchanges for initial public offerings. Meanwhile, the merger and acquisition landscape reached historic heights, dominated by massive transactions that underscored the enduring appeal of Israeli innovation to global technology giants.
Internally, the industry pivoted toward operational efficiency. Employment trends shifted away from general administrative roles toward specialized research, data infrastructure, and product-focused positions. This move was partly accelerated by the integration of generative AI, allowing firms to maintain high productivity with leaner teams. Despite geopolitical challenges, the ecosystem demonstrated resilience, supported by a dedicated core of local and international investors who continue to view the region as a primary source of deep-tech expertise.
Looking ahead, the ecosystem is poised to enter a new phase of integration between digital and physical technologies. The maturation of the AI talent pool and the growing synergy between defense-tech and commercial applications suggest that Israel will lead in frontier areas such as robotics and real-time perception models. As regional partnerships through the Abraham Accords deepen, the focus will likely expand into collaborative intellectual property development and regional infrastructure projects. The shift toward a scale-up nation is expected to persist, with fewer but more robust companies emerging as global category leaders, provided that investment in infrastructure and talent pipelines remains a primary focus.
Methodology Notes
- The report is based on the Startup Nation Finder database, with the following exceptions:
- Selected metrics in the Global Comparison, Finder Index, and AI sections are based on Pitchbook.
- Selected metrics in the Economic Indicators chapter are based on the Israeli Central Bureau of Statistics survey data
- The Financial Stability insights chapter is based on Dun & Bradstreet data
- The report offers a snapshot of 2025 activity as of Dec 31, 2025. Data might be further updated in the future. As a result, figures in this report may differ from figures in prior (and future) published reports.
- The definition and criteria for companies and investors can be found in the Finder Glossary.
- Active Investors are defined as investors with at least 1 investment round in 2025.
- Aggregate metrics may include rounds that are not visible in Finder, per the request of the profile owners.
- Funding Type definitions:
- Private Funding includes the following round types: Pre Seed, Seed, A, B, C, D, E, F, G Rounds, Convertible Debt, SAFE, Equity Crowdfunding, and Undisclosed rounds.
- Funding for Public companies includes the following event types: IPO (including IPO via SPAC or Reverse Merger), Non-Initial Public Offering, PIPE, Convertible Bonds.
- The following events are excluded: Crowdfunding, Debt Financing, Secondary, and Grants.
- Some Finder lists are dynamic and provide current snapshots. Hence the results might not match the figures in the report.
- The Finder Index is an index calculated by Startup Nation Central, based on Israeli companies traded in NASDAQ with a $50 million market cap minimum threshold and using an equal-weighting methodology.
- Figures may be revised based on expanded data availability and future methodology enhancements, especially for newly introduced analyses such as the Scale-Up analysis and AI segmentation.
- Please contact the author for more details about the methodology of specific analyses.
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Startup Nation Central is a free-acting NGO providing global solution seekers frictionless access to Israel’s bold and impatient innovators to help tackle the world’s most pressing challenges. Our free business engagement platform, Finder, grants unrestricted access to real-time, updated information and deep business insights into the Israeli tech ecosystem.