2025 VC Survey'Survival mode' and resilience: How Israel's high-tech industry endured 2024's challenges
2025 VC Survey
'Survival mode' and resilience: How Israel's high-tech industry endured 2024's challenges
Despite economic and geopolitical hurdles, Israel's high-tech sector demonstrated resilience, with a rebound in funding and M&A activity in Q3, says Firstime VC’s Keren Kopilov.
“2024 was extremely challenging for the industry. Surveys in 2024 revealed widespread delays in development, revenue declines, and challenges in fundraising,” said Keren Kopilov of Firstime VC. “Many companies adopted cost-cutting measures, shifting into ‘survival mode’.”
Kopilov joined CTech for its 2025 VC Survey to share insights on how Israel navigated a challenging year and what it can do to secure a prosperous future. “While uncertainty amplified, the sector demonstrated its ability to adapt. This resilience underscores the broader potential of Israel's innovation ecosystem to overcome adversity and maintain long-term competitiveness,” she added.
You can read the entire interview below.
Fund ID
Name of fund/funds: Firstime VC
Total sum of the fund: $250M
Partners: Jonathan Benartzi, Nir Tarlovsky, Itamar Weizman, Keren Kopilov
Notable/select portfolio companies (active): Pixellot, BeeHero, SecuriThings, Baibys, TripleW, FeelBetter
Notable exits: RedisLabs, Talkspace
2024 is over. How can you summarize it in terms of the Israeli high-tech industry?
2024 was extremely challenging for the industry. Surveys in 2024 revealed widespread delays in development, revenue declines, and challenges in fundraising. Many companies adopted cost-cutting measures, shifting into "survival mode". While uncertainty amplified, the sector demonstrated its ability to adapt. This resilience underscores the broader potential of Israel's innovation ecosystem to overcome adversity and maintain long-term competitiveness.
Despite the hurdles, the sector remained a cornerstone of Israel’s economy, contributing significantly to GDP and exports. Although venture capital investments declined sharply in the first half of the year, Q3 marked a recovery, with increased funding and a surge in M&A activity signaling renewed investor confidence. The year also saw a shift in investment focus, with capital increasingly directed toward fewer companies and larger funding rounds, particularly in key sectors.
Looking ahead to 2025 - What challenges and opportunities await the Israeli high-tech sector in the coming year, and how are you, as investors, preparing for them?
Looking ahead to 2025, the Israeli high-tech sector faces a dynamic landscape marked by both challenges and opportunities. On the challenges side, ongoing war still affects investor confidence and operational stability. Additionally, the global economic environment continues to exert pressure, with inflation, high interest rates, and cautious capital deployment affecting growth and liquidity.
At the same time, 2025 offers opportunities for growth and innovation. Sustained global interest, Israeli high-tech is poised not just to recover but to lead in areas like AI and cybersecurity. Emerging fields like climate tech, health tech, defensetech, and quantum computing further present promising avenues for innovation and long-term impact.
How will new American leadership affect the global high-tech industry or economy? And where does this place Israel and its entrepreneurs?
Trump's AI policy emphasizes reducing regulatory barriers, fostering innovation, and maintaining U.S. leadership through a unified regulatory framework. In healthcare, the administration aims to drive innovation, reduce costs and increase flexibility, potentially benefiting health tech companies that can offer efficient and transparent solutions. Overall, it creates a favorable environment for Israel and its entrepreneurs, who are well-positioned to leverage their innovative capabilities and strong ties with the U.S. tech ecosystem.
What are the three most important things the Israeli government should do today to accelerate the high-tech engine in the coming year?
To manage market expectations and create certainty in the economic environment, the Israeli government should focus on key measures.
First, it must reinforce the strength and independence of Israel's judiciary to signal political and economic stability, crucial for maintaining foreign investor trust and sustaining long-term high-tech investments.
Second, tax incentives should be introduced for investors funding Israeli startups, encouraging greater capital flow into the ecosystem.
Third, it should increase funding for the Israeli Innovation Authority to support research and scaling of technologies. Finally, it must invest in people- through comprehensive education plans and talent retention initiatives that will ensure a skilled workforce remains in Israel.
Are there new sectors you see as relevant? Are there any fields you anticipate will weaken significantly in the coming year?
Emerging sectors for growth include Climatetech, driven by global demand for sustainability solutions such as renewable energy, carbon capture, and water technologies, where Israel holds a strong position. Healthtech and Bio Convergence, particularly AI-driven technologies, are also poised for expansion, supported by the new U.S. administration’s focus on deregulation and innovation in healthcare. Defensetech remains a critical area, with heightened geopolitical tensions spurring advancements in autonomous systems, cybersecurity, and military technologies. Additionally, quantum computing and spacetech are gaining traction, offering opportunities in quantum-resistant cybersecurity and satellite innovations, both aligned with Israel’s technological strengths.
Is Israel missing out on the AI revolution in the global arms race? If not, what should the local industry focus on to join the global race?
Israel is a key player in the AI revolution, but a more balanced focus across sectors is needed. While defense and cybersecurity attract significant private investment, reinforcing Israel's global leadership in these fields, other high-potential areas like healthcare and climate tech often face challenges in securing adequate funding. To address this imbalance, the local industry should allocate more resources to these underfunded sectors, which have the potential to become leaders in the global AI revolution.
Could the global IPO drought end in the coming year?
The global IPO drought could ease in the coming year, with cautiously optimistic predictions pointing to a potential rebound in 2025. stabilizing economic conditions, a slowdown in inflation, and the resolution of interest rate uncertainties could create a more favorable environment for IPOs. demand from companies that delayed IPOs during the downturn, combined with private equity firms seeking to offload mature and profitable holdings, is expected to drive renewed activity. While optimism is growing, the pace of recovery will depend on factors such as investor sentiment, regulatory conditions, and geopolitical stability. A moderate improvement in IPO activity is likely, though a full recovery to pre-drought levels may take longer.
From an investor's perspective: will the coming year be better for early-stage startups or more mature companies?
Investors are expected to prioritize businesses with proven revenue streams and scalable models, making mature companies more likely to attract funding due to their lower risk and clearer paths to profitability. However, early-stage startups addressing pressing global challenges with solid business fundamentals and scalable technologies are also likely to attract interest, particularly in high-demand sectors.
Did you raise fund money in 2024 for an existing fund or a new one? What are your expectations regarding this matter for 2025?
In 2024, raising funds was challenging for both existing and new funds, largely due to local affairs compounded by global economic uncertainties, high interest rates, and reduced liquidity in the venture capital market. Looking ahead to 2025, expectations are cautiously optimistic, but much will depend on the government’s ability to end the war and restore stability, which is critical for rebuilding investor confidence and creating a favorable environment for fundraising.
How many investments did you make in 2024, and how does it compare to previous years?
In 2024, we have made a few investments: new equity rounds alongside follow-on investments in our existing portfolio companies. This approach was similar to the previous year. The macroeconomic environment did influence our investment process, prompting us to take more time to learn and delve deeper into each opportunity. However, beyond this adjustment, it did not impact our ability or motivation to make strong investments in exceptional companies.
Provide an example of an intriguing investment you made in 2024. What sets this company apart, or what is distinctive about its sector?
In 2024, one of the most intriguing investments we made was in Remepy, an innovative health tech company pioneering the development of hybrid drugs. Remepy addresses the need for effective and personalized drugs for a variety of illnesses and treatments. The company’s vision is to combine traditional drugs with its “digital molecules” which are digital therapeutic, non-invasive, behavioral, and cognitive interventions that trigger physiological effects and improve the effectiveness of drugs.
Two notable companies that you think will thrive in 2025.
Company Name: BeeHero
Sector + Description of the Product/Service: BeeHero operates in the Ag-tech sector, leveraging precision pollination technology to optimize agricultural productivity. The company's platform uses data analytics, IoT sensors, and machine learning to monitor hive health and improve pollination efficiency.
Investment Amount + Total: $74 million raised to date.
Founding Year: 2017
Reasoning Why This Is Their Year: BeeHero's Pollination Insight Platform has been recognized by Time magazine as one of the Best Inventions of 2024 in the agriculture category. This accolade underscores the platform's innovative approach to providing unprecedented visibility into the pollination process, a critical component of food production.
Company Name: Nostromo
Sector + Description of the Product/Service: Nostromo specializes in energy storage solutions, focusing on commercial and industrial applications. The company’s IceBrick™ thermal energy storage system stores electricity as cold energy during off-peak hours, providing cost-effective and sustainable cooling solutions for buildings and industrial facilities.
Investment Amount + Total: $35.5 million raised to date.
Founding Year: 2017
Reasoning Why This Is Their Year: Nostromo has secured a conditional commitment for a $305.5 million loan guarantee from the U.S. Department of Energy to finance Project IceBrick®. This project involves deploying up to 193 cold thermal energy storage installations across commercial buildings in California. The IceBrick® systems are designed to store energy during periods of low demand and release it during peak times, thereby reducing energy costs, decreasing emissions, and alleviating grid strain associated with HVAC systems.
