By Yonatan Levi, Technology Correspondent
TEL AVIV — As Israel marks its 77th Independence Day, the nation’s tech industry stands as a beacon of resilience, weathering over 18 months of war with Hamas and regional tensions. Despite relentless challenges—reserve call-ups, funding dips, and global skepticism—the sector has posted impressive numbers, raising $10.6 billion in 2024 and $3.2 billion in Q1 2025, with mergers and acquisitions soaring to $35.9 billion, driven by Google’s landmark acquisition of cybersecurity unicorn Wiz. Yet, beneath the surface, experts warn that mounting pressures could reshape the Startup Nation’s future.
“Resilience is in our DNA,” said Avi Hasson, CEO of Startup Nation Central, a nonprofit championing Israel’s tech ecosystem. “This war tested everything—our infrastructure, talent, and trust—but the numbers show we’re still a global force.” Hasson points to cybersecurity and defense tech, which alone drew $3.8 billion last year, cementing Israel’s dominance in these fields. Health, energy, and food tech are also gaining traction, with startups like NRGene, which boosts crop yields through genetic mapping, securing international deals despite the conflict.
The war, sparked by Hamas’s October 7, 2023, attack that killed 1,200 and kidnapped 251, has strained the sector. Up to 30% of tech workers have been called for reserve duty, disrupting operations, especially for early-stage startups. From October 2023 to July 2024, about 8,300 tech employees—2.1% of the workforce—relocated abroad long-term, raising fears of a brain drain. “If this continues, whether due to military burdens or economic uncertainty, we’ll lose talent permanently,” warned Eden Sela, a venture capital analyst. Smaller firms in agritech and healthcare, like Supree, which lost its Gaza-border greenhouse in the attack, have struggled to recover.
Despite these hurdles, the sector’s global reach has been a lifeline. Most Israeli startups operate in the cloud, sidestepping supply chain woes, and maintain U.S.-based sales teams, shielding them from local disruptions. Cybersecurity giants like Check Point and Salt Security have integrated AI to counter a tripling of cyberattacks since October 2023, costing Israel over $3 billion. “The volume of attacks has spiked, but our tech was built for this,” said Jon Medved, CEO of OurCrowd, which launched the Israel Resilience Fund to back war-affected startups.
Yet, clouds of change loom. Political uncertainty from the 2023 judicial overhaul and ongoing regional conflicts have spooked some investors. While mega-rounds for firms like Wiz and VAST Data dominate headlines, early-stage startups face a funding crunch, with investments in Q4 2023 hitting a six-year low. The Israel Innovation Authority reports a 2.6% rise in tech employment to 396,000 in 2023, but warns that without government action—such as boosting R&D budgets or easing reserve burdens—growth could stall. “We’re at a crossroads,” said Sergei Sumkin of Reichman University. “The government must step up, or we risk a lost decade.”
Global perception is another hurdle. Posts on X reflect admiration for Israel’s tech grit, with some calling it “a miracle under fire,” but others note investor caution due to tariffs proposed by U.S. President Donald Trump and regional instability. Over 430 multinational R&D centers, from Intel to Google, remain in Israel, but experts like Hasson stress the need for “strategic action” to maintain this edge, including diversifying into semiconductors and climate tech and reducing reliance on foreign systems for AI and cloud computing.
Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich insist the economy will rebound post-war, citing past recoveries. But economists like Leo Leiderman of Bank Hapoalim argue this conflict’s multi-front nature and duration set it apart. Israel’s GDP grew by just 1% in 2024, down from 6.3% in 2022, and credit rating downgrades signal long-term risks. “Uncertainty is keeping investors on the sidelines,” Leiderman said.
Still, the sector’s spirit remains unbroken. Initiatives like Iron Nation, born in the war’s wake, are funneling funds to crisis-hit startups. Entrepreneurs like Elad Schulman are defiant: “We’ll win, in war and business.” With Israel’s tech ecosystem at a pivotal moment, its next chapter hinges on balancing resilience with bold reforms to secure its place as a global innovation hub.
Yonatan Levi is a technology correspondent for Israel Mirror. He covers Israel’s startup ecosystem and its role in the national economy.
