Preface

2025 will be remembered as a year in which Israeli high-tech once again demonstrated its unique strength to not only withstand external shocks with rare resilience, but also to flourish in times of uncertainty. Against the backdrop of two years of prolonged war on multiple fronts, geopolitical turbulence, and structural changes in global capital markets, Israeli high-tech has attained impressive peaks. Venture capital investments surged by 30% compared to 2024; exit value reached a record of approximately USD 84 billion; and Israel is now ranked as the fourth-largest hub in the world for fundraising, the first outside the United States. Additionally, after a decade of decline in the number of new companies, a rise in entrepreneurial activity was recorded in 2025, with approximately 775 new startups established in Israel.

Alongside these achievements, the importance of high-tech to the Israeli economy is becoming even clearer. This year, high-tech contributed to approximately half of the economy’s growth, and its share of GDP reached a record high of 18.3%. In other words, high-tech is no longer merely a leading sector, but a pillar of the Israeli economy.

The data in the report presents a broader picture of the sector’s maturation in recent years. In 2025, fundraising amounts increased alongside a decline in the number of funding rounds, indicating that most activity was concentrated in large-scale rounds for growth-stage companies. There was also a parallel increase in the value of IPOs and exits, as well as an expansion in the activities of Israeli technology companies, including growth in the number of acquisitions by Israeli companies and in multinational activity in Israel.

At the same time, Israeli high-tech is positioning itself as a leading player in two major technological revolutions: the artificial intelligence and deep tech revolutions. The report’s data indicates that a significant portion of high-tech investment is directed to artificial intelligence, with approximately 32.5% of all investments in 2025 being allocated to Core AI companies. The deep tech field also continues to strengthen and was among the main drivers of growth in high-tech output, particularly in hardware, computing, and electronic equipment.

However, the strength of a mature industry also gives rise to phenomena that warrant examination. As Israeli companies expand and operate in global markets, the tendency to relocate part of their activity outside Israel may also increase. The data points to a decline in the share of employees and managers based in Israel and an increase in the number of relocations. These developments highlight that the challenge is not only to continue creating innovation, but also to ensure that this innovation continues to generate value and growth within Israel.

This is compounded by a macroeconomic factor with broad implications across the entire industry: the decline in the USD-NIS exchange rate. The ongoing erosion of the exchange rate directly affects the profitability of companies whose revenues are dollar-based while their expenses are denominated in shekels, shortens the runway of startups, and effectively increases employment costs in Israel relative to alternatives abroad. Since a central part of high-tech activity is export-based, this is a factor that directly affects the sector’s performance and competitiveness.

Israeli high-tech operates within a complex geopolitical reality, characterized by a global race for technological superiority in artificial intelligence, quantum computing, synthetic biology, and other fields, as well as for control of supply chains for semiconductors, critical minerals, and more. Countries around the world have significantly increased their investments in R&D and in building international partnerships. For Israel, the ability to join the right alliances, create and deepen broad international collaborations, and maintain its position as a significant partner is a prerequisite for the continued leadership of Israeli high-tech.

The Israel Innovation Authority continues to strive to strengthen Israel’s position as an innovation powerhouse and to ensure its continued global leadership amid rapid changes in the technological, financial, and geopolitical environment. To this end, via its Startup Fund, the Authority invests in companies with high-risk, breakthrough innovation in the early stages of their activity; in venture capital funds via the Yozma Fund; and, through the Applied Research Fund and the R&D Infrastructure Fund, the Authority’s investment focuses on preparing the ecosystem for emerging technologies. These measures, together with Israel’s clear advantages, including leadership in R&D, a strong entrepreneurial ecosystem, a sophisticated investor and funding community, and proven technological capabilities, enable Israel not only to maintain its position but also to prepare for and lead the next wave of innovation.

At the center of this effort is the Startup Fund, launched in 2024. Its purpose is to provide a precise response to the financing needs of early-stage technology companies, particularly in deep-tech fields where the availability of private capital is insufficient. The fund operates by participating in funding rounds alongside the private market, aiming to enable companies to reach their next funding milestones while reducing risk. In line with this policy, the Authority is currently working to update the sums invested by the fund in order to reflect the increasing scale of funding rounds and enable optimal funding for companies while reducing risk for private investors.

At the same time, and following the investments made in recent years in R&D infrastructure for artificial intelligence, the Authority is advancing the AI strategy for Israeli high-tech. This strategy was published for industry feedback a few weeks ago. The underlying premise of this strategy is that excellence outweighs scale. Israel cannot compete with global powers in a race of scale, but it can and must lead globally in areas where innovation, specialization, and speed matter more than size. It is our belief that Israeli leadership should be maintained through action along four complementary axes: vertical AI applications in sectors where Israeli high-tech has a relative advantage; strengthening the AI Enablers layer, including semiconductors, communications, data centers, cyber, and others, where Israel has significant technological depth; creating leadership at the front line of technology, with an emphasis on Physical AI, where Israel has many advantages and an open window of opportunity for leadership; and geopolitical positioning that will ensure Israeli access to semiconductors, computing power, and international collaborations.

The report’s findings reiterate that Israeli high-tech is built on strong foundations: high-quality human capital, breakthrough entrepreneurship, and a deep integration into global markets. The strength of Israeli high-tech over the next decade also depends on decisive government action. Consistent and large-scale public investments in Israeli high-tech, alongside the creation of an environment that enables innovation to flourish specifically from Israel, are the central strategic investments capable of ensuring Israel’s continued economic growth.