For much of the past decade, Israeli tech was defined by speed and scale. Start-ups multiplied, capital flowed freely, and growth often mattered more than durability. That era is over.
The data from 2025 points to a structural shift. Israeli tech has entered a more mature phase, one defined less by volume and more by conviction.
Capital returned last year, but it returned with discipline. Approximately $16.7 billion flowed into private Israeli tech companies, representing a sharp increase from the previous year, despite a decline in the number of funding rounds.
Median round sizes rose significantly, reflecting a market that favored fewer, more deliberate bets. Investors remained active, but their behavior changed: diligence deepened, timelines lengthened, and capital followed confidence rather than momentum.
Larger funding rounds
This shift is felt most clearly by founders. Raising capital now takes longer, and the questions are more complex. Investors are no longer satisfied with vision alone; they want evidence of differentiation, execution capacity, and a credible path to scale. For companies that meet that bar, however, funding rounds are larger and more purposefully designed to support focus and long-term execution rather than perpetual fundraising.
The same pattern appears across stages. Mid-stage funding, particularly Series B, expanded in value, while late-stage activity remained selective. Venture funds adapted accordingly, raising fewer but larger funds built to support longer growth cycles. The ecosystem is no longer optimized for speed alone; it is built for endurance as well.
The public market reinforces this logic. IPO activity returned in value terms, driven by a small number of large listings on US exchanges. These offerings were grounded in revenue visibility and global relevance, not speculative growth. At the same time, convertible bonds became the dominant public financing instrument, reflecting a market that values structure and flexibility in a still-cautious environment. Capital is available, but expectations are explicit.
Exit activity adds another dimension. Headline mergers and acquisitions (M&A) value reached $82.3 billion in 2025, driven by a handful of outsized transactions. Remove those, and the picture is still one of recovery and confidence: steady deal flow and renewed strategic interest. What stands out is concentration. Global buyers are increasingly focused on proven, scale-ready companies capable of integration, rather than broad experimentation. Fewer deals now carry greater strategic weight.
AI everywhere
Artificial intelligence cuts across all of this. AI is no longer a standalone sector; it is embedded throughout products, systems, and operating models. Israeli companies are competing on architecture, performance, and cost efficiency, with capital concentrating where AI delivers structural advantage – particularly in software, security, industrial systems, and defense.
The macroeconomic indicators reinforce this transformation. Hi-tech employment in Israel remained essentially flat in 2025, yet the sector’s contribution to GDP continued to grow. Productivity gains – driven in part by AI adoption – allowed output to expand without a parallel increase in the workforce. Financial resilience in hi-tech remained stronger than in the broader economy, underscoring the sector’s central role in the economy.
A parallel shift is taking place regionally. Engagement with Gulf Cooperation Council (GCC) countries expanded in both deal activity and sector breadth, even as publicly disclosed capital volumes remained modest. Much of the real work is happening behind the scenes. Israeli founders report a growing number of quiet pilots, joint evaluations, and long decision cycles, particularly with partners in the United Arab Emirates.
This is how innovation diplomacy operates in practice. Regional partners tend to start with collaboration and proof points, moving toward scaled investment only after trust is established.
Interest is strongest in applied technologies aligned with regional priorities – food systems, water, industrial optimization, security, and infrastructure. Israeli companies bring execution capability and technical depth; regional partners bring access, scale, and long-term deployment pathways.
New era
Seen through this lens, the Abraham Accords appear to be entering a second phase. After an initial period focused on opening doors, the current phase emphasizes execution, learning, and selective investment. Deal counts reached 186 in 2025, the highest level since 2021, alongside a widening sector footprint. Israeli companies increasingly approach the region as a real market, not a symbolic opportunity.
The broader conclusion is clear. Israeli tech is no longer defined by how many start-ups the system can generate but by how effectively companies progress – from start-up to growth, from growth to maturity, from innovation to integration.
This evolution raises the bar for everyone involved. Founders need patience and strategic clarity. Investors need conviction and follow-through. Policymakers need to focus less on headline activity and more on talent, infrastructure, and global connectivity. The reward is not just more companies but stronger ones – capable of sustained impact in a more demanding global environment.
The 2025 data demonstrates an ecosystem that learned to operate under constraint and emerged more focused as a result. The next phase will be defined by execution at scale – and by the ability to turn innovation, capital, and diplomacy into durable economic advantage.■
Avi Hasson is the CEO of Startup Nation Central, a Tel Aviv-based nonprofit organization that promotes Israeli innovation around the world. He previously served as Israel’s chief scientist; founding chairman of the Israel Innovation Authority; and investor in Israeli technology companies.