Israel 2025 – power and speed

Looking at the big picture, investment patterns in Israeli high-tech reflect a trend similar to that of global markets—despite the complex security, political, and social challenges Israel has faced over the past two years. Quantitative easing, the inflation that followed, geopolitical tensions, and the current trade war are affecting Israel just as they are affecting the rest of the world. Investment activity has stabilized at 2018–2019 levels, prior to the boom, with a moderate increase in total capital invested in recent quarters. At the same time, the number of reported deals remains low, and investments are focused on "hot" areas—artificial intelligence (AI) in the U.S. (around 50%, according to CB Insights) and cybersecurity in Israel (around 40%, according to IVC).

Capital is available, but investors are taking a selective approach. There is fierce competition for companies and teams with “consensus” appeal, which allows these entrepreneurs to raise large funding rounds at high valuations. Foreign investors have returned to the Israeli scene, and the Wiz deal has further reinforced local high-tech’s status and Israel’s positioning as a global cyber powerhouse. A renewed sense of momentum is emerging—a hunger for creation among both foreign and Israeli entrepreneurs and investors who are looking for quality investments.

Noam Canetti.

At the edges, two seemingly opposite trends are gaining momentum—yet are expected to serve as complementary growth engines for Israeli high-tech:

1. Significant investments in serial entrepreneurs with proven track records, who are working hard to achieve ambitious goals.
2. Early and targeted funding for lean teams, who leverage AI-based code generation tools to move quickly and efficiently.

Serial Entrepreneurs – Like a flywheel, the exponential growth of the local ecosystem over the past decade has produced experienced entrepreneurs who are now returning to start their next companies. These are individuals who have already launched ventures, gone public or been acquired, taken on senior roles in global companies—and are now coming back with a deep understanding of markets and processes, an established network, and proven execution capabilities. In the case of M&A, as in Silicon Valley, Israeli investors also track the post-acquisition commitments of these entrepreneurs—waiting for the moment they re-enter the arena. In recent years—driven by accumulated experience and inspired by the success of Wiz—more Israeli founders and investors are aiming high from the outset: pursuing big ideas, raising significant capital, and targeting mature markets. While traditionally most local startups sought to define new categories and avoided head-on competition with incumbents, today’s generation is going for the entire pot right from the start.

These large fundraises—and the media attention they attract—have a cumulative effect: they draw in top talent, generate commercial interest, and accelerate business growth. A significant share of recent investments has gone to companies founded by serial entrepreneurs, some of which have reached valuations in the hundreds of millions or even billions of dollars within a short time. The fundraising successes of Eon (established by the CloudEndure founders) and Zyg (established by ironSource founders) are clear examples.

Lean Teams – At the same time, almost under the radar, an opposite phenomenon is taking shape: small, agile, AI-driven startups founded by young entrepreneurs—sometimes with little or no prior experience—who now have direct access to fast, cheap, and innovative development tools. These tools enable founders to act quickly: build MVPs in a matter of weeks, raise relatively modest sums, and test product-market fit in near real time—all with very small teams. In February, Andrej Karpathy, co-founder of OpenAI, coined the term vibe coding—a development style based on using large language models (LLMs) that allow developers to describe products in natural language, while the AI generates the code. The development process becomes a dialogue with the computer—eliminating the need to write code manually. The direction is clear, even if the road to full adoption will still take time.

Y Combinator recently reported that around 25% of companies in its latest batch wrote most of their code using LLMs. Companies like Cursor and Sierra are already reporting significant revenue and capital raised—despite operating with very small teams. Meanwhile, Sam Altman predicts that it won’t be long before we see a unicorn built by a single employee. In Israel, several venture capital funds have launched dedicated investment tracks to support these kinds of ventures. The revolution is also reaching large players: Google noted in October that about 25% of its new code is already generated by AI tools.

These two trends complement one another and are expanding the opportunity landscape for Israeli high-tech. The combination of Israeli entrepreneurial spirit, creativity, and execution ability with deep experience, market insight, and cutting-edge AI technologies is forming a new equation—of power and speed—that places the Startup Nation on a renewed path toward new horizons.

Noam Canetti is a Managing Partner at EY Israel.