Brought together by war, defense-tech partnerships put startups on front lines

The pairing of Israel’s tech and defense sectors seems like a match made in heaven.

Yet it was not until war forced the two industries into a shotgun wedding that the relationship began to flourish, transforming both the local startup ecosystem and the military’s innovation pipeline.

Driven by pressing military threats, the once-casual acquaintance between young tech companies and the Israel Defense Forces has rapidly evolved into a core pillar of Israel’s defense strategy, with hundreds of startups now supplying capabilities to meet the army’s real-time needs.

“For years, Israel was known worldwide as a ‘cyber nation.’ Today, we have evolved into a true ‘defense tech nation,'” said Defense Ministry director general Maj. Gen. (res.) Amir Baram. “Our innovation portfolio now spans the full spectrum of advanced capabilities: aerial defense systems, unmanned vehicles, electronic warfare, quantum-resistant communications, intelligence and surveillance systems, cyber defense, and space technologies.”

Baram was one of dozens of defense experts who spoke at last week’s second annual DefenseTech Summit, held at Tel Aviv University.

Organized by the Defense Ministry’s Directorate of Defense Research and Development, the two-day event offered a rare platform for generals and entrepreneurs to connect, with one message emerging repeatedly: Israel’s defense establishment is increasingly turning to its startup ecosystem for innovation, including tech initially designed for civilian use.

A wartime ecosystem

The dalliance between the Defense Ministry and the private tech sector can be traced back to 2019, when the government launched the Innofense program. The program identifies companies whose products have potential battlefield applications and supplies them with early funding, including initial grants of NIS 200,000 ($61,000), to accelerate development.

The model proved useful, but after Hamas’s October 7, 2023, onslaught, it became essential.

Today, the ministry works with more than 300 startups, a third of which have been actively contributing to the war effort. Many of them involve dual-use technologies that were not designed for military use, but that the military could still use.

The phenomenon helped spur the launch of Kela Technologies, which was founded in the aftermath of Hamas’s October 7 attack to address the need for a more flexible platform to quickly integrate commercial innovations into military systems.

“We are at war — we don’t have the privilege to wait. What we are lacking are fast, open ecosystems,” said company president and co-founder Hamutal Meridor. “That’s where startups come in… [They] operate at the same tempo as the battlefield. Today, the side that adapts the fastest is the side that wins.”

Kela’s founders, like most of the brains behind Israel’s thriving tech scene, are military veterans, giving them familiarity with what kinds of innovations might be useful in a battlefield setting.

The army’s vaunted signals intelligence unit, 8200, has often been credited with fueling the country’s startup bonanza, churning out cohort after cohort of computer whizzes who use their skills to develop cutting-edge tech innovations.

With the breakout of the defense tech sector, those innovations are being fed back into the military pipeline.

“In Israel, necessity has created something distinctive: an innovative defense tech ecosystem that only a few are able to replicate, born from existential security challenges and shaped over decades of operational experience,” Baram explained. “Direct feedback loops connect the frontline, engineers, and industry partners — creating a robust chain from battlefield needs to deployed solutions. These are combat-proven systems. This is what defense tech means in Israel.”

This feedback cycle — soldiers flagging needs, engineers responding almost immediately, systems deployed faster than ever before — has proven so successful that officials outside Israel are taking note.

“We have much to learn from Israel,” chair of the NATO Innovation Fund Dame Fiona Murray said at the summit, noting that defense ministries around the world have been struggling to achieve the same level of success integrating startup technologies into their military arsenals.

Blurred lines

The war is also credited with accelerating the adoption of dual-use systems designed for both commercial and military applications.

Maj. Gen. (ret.) Amir Eshel, former Defense Ministry director general and air force chief who is now a senior partner at Aurelius Capital, said the sector is still only scratching the surface. “Dual-use design from square one — today we are still far from realizing its full potential,” he noted.

For founders, dual‑use often provides regulatory freedom and commercial scale. In Israel, technologies classified as defense‑specific fall under distinct regulatory controls designed to prevent sensitive military capabilities from proliferating without oversight, including export licensing requirements and national security reviews that don’t apply in the same way to technologies pitched primarily as civilian.

Startups that build dual‑use technologies can often operate outside the narrowest definitions of military hardware and thus avoid some of the most stringent export and investment restrictions. Because their primary classification is civilian or commercial — even if the technology can be adapted for defense purposes — they may be subject to lighter licensing requirements and fewer hurdles to attracting foreign capital. This can lower compliance costs and broaden potential markets compared with companies focused exclusively on classified defense systems.

“If you can avoid the world of restrictions and regulations… it’s probably better,” said Yoav Manor, a partner at the Shibolet law firm, which specializes in high-tech and venture capital. “And if your technology can serve both the defense industry and the civilian market, that’s great.”

Still, Manor stressed that startups must adapt and tailor their products separately for each sector, rather than assume a one-size-fits-all solution.

Several companies at the summit illustrated how dual-use systems can jump between sectors. Among them was AIR, which produces an electric vertical take-off and landing (eVTOL) vehicle for personal travel and unmanned cargo. The company is exploring military applications through the US Air Force’s Agility Prime program, investigating potential uses for logistics and rapid-deployment missions.

Lingacom looks in the other direction, designing advanced scanners that allow users to peer underground without disturbing the soil by detecting muons, naturally occurring subatomic particles that can penetrate rock and earth.

Used by archaeologists, miners, and civil engineers, the tech also has extensive potential military or homeland security applications, including helping spot underground fortifications or subterranean attack tunnels.

Defense tech defies global pushback

The rapid expansion of Israel’s defense-tech sector comes despite global political pressure. European arms embargoes, activist blockades in Italy and Greece, and boycotts targeting companies tied to Israel’s defense establishment have raised questions about whether collaboration with the IDF could limit commercial potential.

Heven Aerotech suggests the opposite. The company, which markets itself as “leading the charge in energy solutions for next-gen drone technology,” develops hydrogen-powered and heavy-lift UAVs used for everything from artificial pollination to delivering blood transfusions directly to soldiers in combat zones.

Far from being shunned, Heven Aerotech recently led a $100 million funding round, with the company valued at $1 billion.

Investor Lorne Abony of Texas Venture Partners called it “Israel’s first defense-tech unicorn.”

In fact, Israel’s defense tech ecosystem has expanded steadily as a whole since 2020, according to the nonprofit Startup Nation Central, with growth accelerating sharply in 2023 amid rising global and regional conflict.

In a defense tech landscape map published earlier this year, the organization highlighted dual-use innovation as a “defining characteristic” of the sector, noting that this cross-market applicability makes Israeli defense technologies especially appealing to both governments and major global corporations.

That growing interest was evident at this year’s DefenseTech Summit.

“There are much more foreign and American investors here in the crowd, which is different than what we felt last year at this conference,” Lital Leshem, co-founder and managing partner at Protego Ventures, one of the first defense tech venture capitals in Israel, said. “I think that speaks for itself.”