Despite ongoing war, investments in Israeli startups hit three-year high

Israel has been facing the longest and most intense war in its history with the Hamas terror group, as well as with Iran and its regional proxies, and yet, investment in the local tech market hit a three-year high in the first half of 2025.

Israeli tech startups and firms raised $9.3 billion in private capital from investors across 365 funding rounds in the first six months of the year, up 54 percent from the $6 billion secured during the second half of 2024, according to data collated by Startup Nation Central, which tracks the local tech ecosystem. It marks the strongest six-month period for Israeli tech funding in three years.

The military mobilized hundreds of thousands of reserve soldiers with the outbreak of the Israel-Hamas war following the October 7, 2023, onslaught, some of whom have remained in uniform for months with only short breaks throughout the period. The resulting absence of personnel in the tech sector, the growth engine of the Israeli economy, has damaged startups’ day-to-day operations, especially of smaller firms, as well as their ability to attract foreign investors and raise funding.

Funding difficulties hampering the local tech industry during last year’s more intense fighting on multiple fronts started to recede in late 2024, with the sector’s recovery gaining pace this year, according to Startup Nation Central. In the three months ending in June this year, when Israel went to war with Iran, new capital raised by local startups almost doubled to $6 billion from the $3.3 billion investments recorded in the first three months of 2025.

Startup Nation Central CEO Avi Hasson said the data “proves that the market continues to price in long-term confidence in Israeli tech, even amid a complex security reality.”

“During the lead-up to and throughout the campaign against Iran, we saw 31 funding rounds, providing clear evidence that entrepreneurs are still building and investors still remain confident,” said Hasson. “The strength of the shekel, positive market trends, and the strong presence of global players, both in VC and strategic acquisitions, all reflect the market’s view of Israel’s medium and long-term economic potential.”

Illustrative: Eastech tech campus workspace in East Jerusalem. (Courtesy)

Larger deals led capital-raising rounds in the first half of the year, with 32 funding rounds exceeding $50 million compared with 20 during the last six months of 2024. AI startup Safe Superintelligence, co-founded by Ilya Sutskever, OpenAI’s former chief scientist, nabbed $2 billion from a Series B funding round, one of the largest in Israel’s history.

Across sectors, fundraising was led by enterprise software companies, which raised $3.19 billion across 71 financing rounds in the first six months of 2025. Cybersecurity followed with $1.98 billion across 56 deals, and fintech was third, with $751 million across 29 rounds.

A total of 447 investors have parked funds in Israel in the first half of 2025, marking a 12% decrease from the previous six months. Despite the ongoing regional conflict and heightened geopolitical tensions, the share of financing rounds with global investor participation increased from 61% in the last six months of 2024 to 69% in the first half of this year.

According to Hasson, “This is yet another sign that Israeli technology, with its unique characteristics and capabilities, remains a valuable force in the global market.”