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Not the 2024 Report
THE POWER OF SCALE: Israeli Tech Global Edge
14th January 2025
Including commentary by:
CONTENT
INTRODUCTION
Foreword
Avi Hasson
Startup Nation Central
CEO
In 2024, Israel solidified its position as a global scale-up powerhouse. Despite ongoing war and geopolitical tensions, the tech ecosystem achieved remarkable milestones—unexpected funding levels, high-value M&A deals, and stellar performance by public companies. This resilience stems from Israel’s relentless drive for innovation, bolstered by the growing maturity and sophistication of the ecosystem.
Scaling is no longer just about unicorns. Growth now comes from strategic acquisitions, record-breaking funding rounds, and increased global integration, with Israel serving as a hub for multinational R&D. However, sustaining this momentum requires addressing critical challenges like fostering academic research, early-stage innovation, preparing for the AI revolution, and ensuring long-term economic stability.
This year reinforced a vital truth: global investment and technology trends often outweigh local challenges, cementing Israel’s leadership in cybersecurity, health tech, and climate tech. But maintaining this edge demands proactive policies, strategic investments, and a focus on new growth engines.
The story of 2024 is one of resilience, adaptation, and ambition. By tackling challenges head-on, Israeli tech will continue to set benchmarks for global innovation. This is the power of scale.
Executive Summary
Yariv Lotan
VP of Digital Products,
Development,
Data and Insights
In a year as complex and dynamic as 2024, Israel’s tech ecosystem once again demonstrated its resilience and adaptability. Despite domestic uncertainties and geopolitical tensions, one key insight stands out: global dynamics—especially U.S. investment trends—consistently overshadow local challenges, enabling Israel to thrive as a global hub for innovation, investment, and leadership in critical sectors like cybersecurity. Equally important is the recognition that Israel’s tech ecosystem has evolved beyond being a production line for early-stage startups. It has matured into a scale-up powerhouse, bolstered by the active participation of leading multinationals.
The 2024 Story
Israel’s High-Tech Sector is Thriving Against the Odds
- Economic Contribution: The Israeli tech ecosystem, with a GDP share double that of the U.S. tech sector, led Israel’s economic growth with a 2.2% increase in high-tech GDP (Q1–Q3 2024), while the overall economy contracted by 1.5%. Read More
- Private Funding Growth: Israeli tech companies raised over $12 billion in 2024, marking a 27% year-over-year increase. Read More
- Global Perspective: This trend in funding rounds and amounts is aligned with the U.S. VC trends and outpaced Europe and Asia. Read More
- Early-Stage Activity: Early rounds (pre-seed to Series A) accounted for 80% of deals, while late-stage funding saw its dollar volume peak, nearing 2021 levels. Read More
- MNC Activity: Multinational corporations increased M&A activity in Israel, including several high-value deals, while their private investments showed steady performance throughout 2024. Read More
Beyond Startups: Building Israel’s Scale-Up Powerhouse
- Transformation: Israel’s tech ecosystem is shifting from a startup focus to a scale-up powerhouse, characterized by larger funding rounds, a growing number of mature companies, and increased acquisition-driven exits.
- Acquisition Activity: Israeli scale-ups have evolved from acquisition targets to active acquirers, building broader ecosystems and driving sustained growth and value creation. Larger acquisitions reflect not only the significant capital invested but also the readiness of these companies to scale and compete globally.
- Market Performance: An equal-weight index of the top 70 Israeli tech companies (valuation of over $50M) traded on NASDAQ rose by 15.8% in 2024, outperforming the NASDAQ 100 equal-weight index, which increased by 9.4%. Read More
- Revenue and Efficiency: Israeli public companies listed on NASDAQ demonstrated resilience, consistently delivering revenue growth and improving productivity despite the external challenges of 2024. Read More
- Mega-Rounds: In 2024, Israeli tech saw 15 mega-rounds totaling $4 billion, accounting for 41% of total funding. This marks a sharp rise from 2023’s 9 rounds and $2 billion (22%), showcasing the strength of the scale-up ecosystem and the ability of established companies to attract substantial global investment. Read More
Global Cybersecurity Dominance and the Emerging Defense Sector
- Global Leadership: Israel’s cybersecurity sector continues to dominate globally, with private funding equaling over 40% of U.S. cybersecurity funding. Half of the world’s top 10 cybersecurity companies were founded by Israelis, with seven maintaining R&D centers locally. Notably, all 10 leaders have acquired Israeli cybersecurity firms in recent years, highlighting Israel’s central role in global innovation.
- Round Sizes: The median funding round in cybersecurity was more than double the average across Israel’s tech ecosystem, reflecting the sector’s strategic importance and robust investor confidence. Read More
- Alignment with Defense Trends: Israel’s cybersecurity ecosystem is tightly integrated with the broader defense sector, addressing a range of threats from state-sponsored cyberattacks to the protection of critical infrastructure. This alignment cements Israel’s position as a global leader in tackling the interconnected challenges of security and defense in an increasingly volatile world. Read More
A Record Year for M&As in Israel
- Record Performance: 2024 marked Israel’s strongest year for acquisition-driven exits, with total event values approaching record highs. Read More
- Strategic Role: Israeli companies played a growing role in larger event sizes, showcasing their strategic importance and financial strength in the global market. Read More
- Multinational Activity: Acquisitions by multinationals with R&D and innovation operations in Israel reached new heights, further emphasizing the country’s significance as a hub for global technology and innovation. Read More
Challenges Facing the Ecosystem
While these achievements underscore the strength of Israel’s tech ecosystem, several challenges must be addressed to ensure sustained growth:
- Declining Startup Formation: The global trend of fewer newly founded startups is taking a toll on Israel’s pipeline of innovation. While the quality of existing companies remains high, the declining quantity of new entrants limits the diversity of future opportunities.
- Fewer Investment Rounds: A reduction in the number of investment rounds constrains early-stage innovation, shrinking the pipeline for new technologies. Balanced grants and incentives could help foster more opportunities for early-stage companies.
- Judicial and Economic Uncertainty, and Regional Instability: Judicial and economic uncertainty, alongside regional instability, poses significant risks to Israel’s competitiveness as a global tech hub. Investor confidence is challenged by unclear judicial reforms and economic policies, while regional instability increases perceived risks for global partners. Clear strategies and long-term planning are essential to maintaining Israel’s leadership in the global tech ecosystem.
- Sectoral Breadth Under Pressure: Israel’s historically diverse range of innovation sectors is narrowing due to reduced funding for startups in emerging areas. Providing targeted incentives to investors and multinationals could help sustain growth across sectors.
- The AI Industrial Revolution: As AI reshapes industries globally, Israel must secure resources, talent, and R&D capabilities to remain competitive. Proactive government support, strategic focus, and agile regulation will be essential to foster growth in this transformative sector.
The Government’s Role in Securing Israel’s Tech Future
The Israeli government has a critical role in shaping the long-term success of the tech ecosystem. Effective support can be achieved through three strategic actions:
- Minimizing Uncertainty: Address political and economic instability by establishing clear targets and implementing consistent, predictable policies that bolster investor confidence.
- Investing in Infrastructure: Strengthen the foundation of innovation by improving the education system, funding academic research, supporting innovation labs, and offering loans and grants to startups. These investments are essential for cultivating the talent and technologies needed to maintain global competitiveness.
- Providing Incentives: Introduce tax benefits and targeted incentives to attract investors and multinational corporations. High-tech growth generates significant income tax revenue, and incentivizing this sector will ensure sustained contributions to the national economy.
At present, these measures are insufficiently prioritized in Israel. The absence of a comprehensive long-term plan, weakening education systems, and underinvestment in academia and industry are eroding the nation’s competitive edge. Without immediate and decisive action, Israel risks falling behind global leaders in transformative fields like AI, quantum technologies, and other emerging industries critical to the future of innovation.
2025 Forecast Outline
- US Influence: U.S. economic and financial trends will continue to shape Israel’s tech ecosystem performance.
- Cautious Optimism: Investors will focus on high-quality opportunities in sectors with long-term growth potential. Additionally, as regional instability eases, Israel is expected to benefit from increased investments, mirroring trends observed in previous post-tension periods. Read the Full Report
- Funding Growth: Private funding is expected to increase, with scale-ups continuing to drive ecosystem impact.
- AI Focus: AI is set to become a cornerstone of venture strategy, with vertical implementations driving value and return on investment (ROI). Significant investments in AI infrastructure, such as data centers, are anticipated to support this growth. Read the AI Report
- Cybersecurity Leadership: Cybersecurity will remain a top investment priority, delivering significant exits through acquisitions and IPOs.
- M&As and IPOs: M&A activity will remain strong, and the IPO market may reopen, providing additional exit opportunities.
Expert Quotes from the Report
“When I look specifically at the field of cybersecurity, it’s evident that 2025 will be a pivotal year. The growing complexity of cyber threats, the rapid evolution of business landscapes, and regulatory pressures are elevating cybersecurity from a priority to a global necessity.”
“A key positive development has been the growing role of Israeli growth companies as both major employers and innovation enablers. To secure the future of Israeli high-tech, we must prioritize investment in education and human capital at all levels.
“Despite significant geopolitical challenges over the past 18 months, Israel has remained a highly attractive M&A market, driven by its culture of innovation and highly skilled workforce. In 2024, 117 Israeli tech M&A transactions were completed, totaling approximately $17 billion—marking a 20% increase in transaction volume and a remarkable 60% rise in deal value compared to 2023. With stabilizing inflation, lower interest rates, and a strengthening IPO market, 2025 is poised to be an exceptionally active year for Israel’s thriving tech sector.”
“AI is a catalyst for innovation and transformation. By embracing responsible practices and next-gen architectures, enterprises can unlock their full potential to help reshape industries and drive progress for years to come.”
“Amid the uncertainty, Permira, one of Europe’s leading private equity firms, acquired a controlling share in the company. This transaction reflected not only confidence in BioCatch’s innovative solutions but also trust in the long-term potential of Israel’s tech ecosystem.”
“The main casualties of this shift are early growth companies, particularly those in Post-A and Post-B stages. These companies are navigating the most precarious phase of their journey—requiring significant investments that don’t allow for a ‘spray and pray’ strategy with small amounts, while still carrying high risk and being far from liquidation or investor returns.”
“Sustaining the high-tech sector as a platform for economic growth and further enhancing labor productivity through innovation and digital transformation are essential for enhancing the economy’s capacity to sustain higher defense spending, preserving high-quality government services, and maintaining a high per capita income.”
“When I look specifically at the field of cybersecurity, it’s evident that 2025 will be a pivotal year. The growing complexity of cyber threats, the rapid evolution of business landscapes, and regulatory pressures are elevating cybersecurity from a priority to a global necessity.”
Yevgeny DibrovCo-Founder and CEO, Armis Security
“A key positive development has been the growing role of Israeli growth companies as both major employers and innovation enablers. To secure the future of Israeli high-tech, we must prioritize investment in education and human capital at all levels.
Nir ZoharPresident and COO of Wix & Chair of the Israel Growth Forum
“Despite significant geopolitical challenges over the past 18 months, Israel has remained a highly attractive M&A market, driven by its culture of innovation and highly skilled workforce. In 2024, 117 Israeli tech M&A transactions were completed, totaling approximately $17 billion—marking a 20% increase in transaction volume and a remarkable 60% rise in deal value compared to 2023. With stabilizing inflation, lower interest rates, and a strengthening IPO market, 2025 is poised to be an exceptionally active year for Israel’s thriving tech sector.”
Natti GinorHead of Israel Investment Banking, Jefferies
“AI is a catalyst for innovation and transformation. By embracing responsible practices and next-gen architectures, enterprises can unlock their full potential to help reshape industries and drive progress for years to come.”
George MathewManaging Director, Insight Partners
“Amid the uncertainty, Permira, one of Europe’s leading private equity firms, acquired a controlling share in the company. This transaction reflected not only confidence in BioCatch’s innovative solutions but also trust in the long-term potential of Israel’s tech ecosystem.”
Gadi MazorCEO, BioCatch
“The main casualties of this shift are early growth companies, particularly those in Post-A and Post-B stages. These companies are navigating the most precarious phase of their journey—requiring significant investments that don’t allow for a ‘spray and pray’ strategy with small amounts, while still carrying high risk and being far from liquidation or investor returns.”
Kerem NevoVP Growth, Israel Innovation Authority
“Sustaining the high-tech sector as a platform for economic growth and further enhancing labor productivity through innovation and digital transformation are essential for enhancing the economy’s capacity to sustain higher defense spending, preserving high-quality government services, and maintaining a high per capita income.”
Professor Zvi Eckstein & Dr. Sergei SumkinHead & Senior Researcher, Aaron Institute for Economic Policy