"To build Israeli companies like Anduril or Palantir, we must focus on comprehensive solutions, not niche ones"
Industry leaders including Eli Friedman, Rotem Eldar, Yonatan Altman, Yoav Etsion, and Lital Leshem stress the need for Israeli defense-tech companies to shift towards comprehensive, user-driven solutions. They argue this shift is essential for competing globally and scaling companies like Anduril and Palantir.
“Defense-focused innovation is expanding into regions that previously remained on the sidelines. Japan, for instance, is now making its way into the defense technology arena. One of the key forces driving growth in defense technology is the downturn in the automotive technology industry,” said Eli Friedman, VP of Innovation at Elbit Systems. Speaking at a defense-tech event held in Tel Aviv last week, Friedman highlighted this shift and its implications.
"In recent years, investment in the automotive sector has dwindled, leaving many deep-tech companies with fewer pathways for advancement. This shift has created new opportunities in defense technology. For example, vehicle management technologies originally developed for the automotive sector are now being adapted for military applications. Similarly, command and control systems—once a hallmark of automotive innovation—are also proving to be highly relevant in defense technology," he explained.
Rotem Eldar, Managing Partner at D10 VC Fund, noted that while the term ‘defense-tech’ has seen a slight uptick in use in Israel over the past two years, the industry still lags behind compared to other sectors. "In the U.S., this has been a well-established domain for years, attracting investment from the largest VC funds. There are already unicorns, active M&A deals, and substantial capital flowing into the sector."
Eldar pointed out that the early signs of this trend emerged in the space-tech industry. "We have witnessed a transition from what was once a fully government-controlled, highly expensive, and project-based sector toward a more democratized landscape. As development moved into private hands, business models, technologies, and costs evolved. These are the first signs of a change we are now seeing in the defense sector as well. Defense-tech companies are embracing a more product-driven model, aligning more closely with the high-tech industry."
He further emphasized the importance of shifting toward comprehensive solutions: "In recent years, we’ve learned how to create complete solutions—getting closer to the end user, solving their challenges directly, and taking full ownership of the product. If we want to build Israeli companies on the scale of Anduril or Palantir, we need to think bigger in terms of developing comprehensive solutions rather than just addressing niche problems or adding isolated features."
The event, co-hosted by the law firm Amit, Pollak, Matalon & Co. (APM), Deloitte, and iHLS, explored opportunities and trends in the defense-tech sector. "High-tech has always been part of the defense domain, but over the years, as conflicts have increased, this integration has become more pronounced. As a result, defense-tech startups are emerging at an unprecedented rate, outpacing other sectors," said Yonatan Altman, Chairman of APM.
Yoav Etsion, Managing Partner at APM and Co-Head of the High-Tech Department, who led a discussion with a defense-tech investor panel, noted: "In the past, VC investments in defense-tech were rare due to strict regulations, the industry's deep-tech nature, and complex ethical considerations. However, this is changing rapidly. The transformation began a few years ago and has only accelerated over the past two years."
Lital Leshem, Partner at Protego VC Fund, underscored the growing role of private capital in defense-tech: "While investment funds in the U.S. recognized the sector’s potential years ago, Israel remained hesitant about committing private capital to defense. Previously considered too complex, with long development cycles and significant regulatory barriers that discouraged venture capital investment, the defense technology sector is now attracting new funding. Companies such as Anduril, Shield AI, and Palantir have set a precedent, instilling greater confidence among investors to enter this domain."
