"More in line with the US than the war": Israel’s tech ecosystem ‘thrives’ against the odds
A report by Startup Nation Central has highlighted resilience and adaptability amid domestic uncertainties and geopolitical tensions.
Double Black Swan events have hit Israel and its high-tech sector in recent years, throwing its reputation as a stable ecosystem into question amid the proposed judicial reforms and war with Gaza that dominated much of the last two years. Despite the turbulence that caused a temporary crash in confidence, its 2024 story has defied the odds and proven to be as resilient as ever - paving the way to a restorative 2025.
According to data from Startup Nation Central, the Israeli tech ecosystem led Israel’s economic growth with a 2.2% increase in high-tech GDP (Q1–Q3 2024), as the overall economy contracted by 1.5%. While official numbers are $10 billion, the non-profit organization estimates that Israeli tech companies raised as much as $12 billion in 2024, marking a 27% increase compared to 2023.
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(L to R) Yariv Lotan, Rotem Shacham, Arik Kleinstein
(Photo: Miri Davidovich/Ari Sultan/Ben Itzhaki)
The trend in funding rounds and amounts are each aligned with the American VC trends and outpaced both Europe and Asia, showing how the US and Israel mirror each other.
“If you go to the overall story of the year in Israel, and what you see is that it is more in line with the US than the war,” said Yariv Lotan, VP of Digital Products, Development, Data and Insights at Startup Nation Central. “That really emphasizes how resilient we are and how connected we are to ‘the mothership’ in terms of the busy landscape.”
While the overall number of funding events decreased in 2024 (766 compared to 796 in 2023), the median number per round rose as much as 60% ($8 million, up from $5 million). If the trend continues, it shows that the ecosystem is on its way to a recovery that once again goes against the odds.
“The market has recuperated and we're on an upward trajectory versus the last two years,” said Rotem Shacham, Director at PSG Equity. “I think the world came out of the tech challenges that were around in 2023 and 2024 faster than Israel. And I think the beginning of 2025 is very promising.”
PSG Equity is a growth equity firm that partners with software and technology-enabled services companies to help them navigate transformational growth. Shacham is a Director at its Israel office where she leads investments at growth stage companies run by Israeli founders. To date, the fund has raised more than $20 billion and last month led a $170 million round for Quantum Machines, a provider of quantum control solutions. Other portfolio companies from Israel include Commbox, Lusha, and Pixellot, among others.
“You see more companies raising larger rounds and more companies raising,” she continued. “I think a lot of companies have used the funding that they raised at the height of the bubble in 2021, and now we see a lot of good companies raising growth rounds, showing good financial profiles and technology milestones they've achieved. I think the year started well, especially compared to 2024.”
As for the sectors worth watching, Shacham says she is “very bullish” on quantum alongside other prominent industries, such as cybersecurity and defense. “From a tech perspective… I'm very optimistic about the ability of good companies to get funding to grow. It all depends on the geopolitical, financial, and the macro environment in the US, but assuming no black swan events will happen, I'm very optimistic.”
Arik Kleinstein, Co-Founder and Managing Partner at Glilot Capital Partners, agrees. “We're not fully back to what we used to be or what we used to be like before the war, but we are on our way to full recovery,” he said. “Maybe it’s not a good idea to put a number on it, but at least in terms of the money flow from non-Israeli investors into the ecosystem or Israeli startups, I think that statistically we are back to where it used to be.”
Glilot Capital Partners is an early-stage VC fund that invests in entrepreneurs in Israel. Portfolio companies include Anecdotes, Aorato (acquired by Microsoft), and At-Bay. According to Kleinstein, 2025 started strong and will continue as the world looks to invest in industries where Israel shows unique talent and potential, notably cybersecurity and generative AI. He also celebrated Israel’s returning reputation as “sophisticated and creative” with military capabilities able to take on Hamas and Hezbollah, reinforcing confidence for investors overseas.
“The world loves winners, and the world hates losers,” he added. “We were the losers up until six months ago, now we are the winners.”
The first half of the decade tested Israel in a myriad of ways. First, it faced the pandemic alongside the rest of the world, and only after that did it face a new battle full of internal political turmoil. Its newest generational challenge is its latest war, played out for the world to see, and trying to recover from reputational damage that threw its record of reliability into doubt. But if the full 2024 numbers and pace of 2025 are anything to go by, the year - and second half of the decade - show a promising ride ahead.
