Can Israeli startups reinvent the global defense industry?

The past year has seen a significant global resurgence in defense technologies—reflected in growing discourse, increased resource allocation, and rising interest from local and international investors. Israel, at the forefront of global security challenges, provides fertile ground for innovation in the field known as defense-tech. The unique convergence of the IDF’s complex operational needs and a strong innovation ecosystem accelerates the development of fast and effective solutions, placing Israeli high-tech at the global cutting edge.

Geopolitical trends and the push for defense self-reliance are driving demand for advanced security technologies and products. This creates enormous opportunities for Israeli companies—not only in developing systems but also in raw materials and ammunition production. Israel’s ecosystem, which blends graduates of elite military tech units with combat experience and strong government support, has become a global hub for innovation in defense technologies—many already proving their value in active combat.

Amikam Norkin.

This is not a short-term trend but the result of a long-maturing process, rooted in the growing recognition that defense industries—and the technologies that power them—are becoming one of the defining sectors of the coming decade. From tensions on the Korean Peninsula and China’s growing assertiveness, to Russia’s invasion of Ukraine, and Israel’s Swords of Iron War and campaign against Iran and Hezbollah, conflict has returned to center stage. These developments have spurred nations to expand their defense budgets and adopt cutting-edge technologies.

The COVID-19 pandemic also exposed vulnerabilities in national infrastructure—from food security to the continuous supply of components critical to defense. Israel’s ammunition shortages following the October 7, 2023 attacks serve as a recent example. This mirrors similar challenges in Europe after Russia’s invasion of Ukraine, which forced many armies to restart production and procurement of basic materials and systems. Global perceptions of what constitutes adequate wartime stockpiles have shifted dramatically.

A parallel technological revolution has dramatically lowered production costs and broadened access to advanced capabilities. Once exclusive to world powers, sophisticated military technologies are increasingly accessible to non-state actors. The spread of precision missile systems is a striking example. This has intensified competition and spurred innovation, forcing countries and companies to develop new solutions to preserve strategic superiority.

To meet these challenges, defense ministries—including Israel’s—have begun integrating startups into national security efforts. The Israeli Ministry of Defense, for instance, actively supports startups through grants and assistance in developing deployable solutions. Large defense contractors, once wary of competition, are now fostering early-stage companies within their ecosystems. This collaborative model has catalyzed a significant influx of resources and talent into the sector.

Key areas of focus include:

• The rise of “good enough systems”—affordable, functional technologies designed to counter low-cost threats.
• Advanced detection systems to secure borders and critical infrastructure.
• Counter-drone and unmanned systems, with increasing reliance on autonomy and rapid deployment.
• Logistics solutions for transporting cargo across land and sea to and from the battlefield.
• Satellite communications for uninterrupted connectivity across all operational layers.
• Sustainable energy solutions and technologies to ensure continuous operation in combat environments.

For Israeli defense-tech entrepreneurs, the field presents unique challenges. Securing funding across growth stages requires precise financial planning. Companies must align development and sales cycles with realistic valuations—particularly given the distinct nature of exits in the defense sector.

Collaboration with the IDF and other security bodies can significantly enhance international sales potential. Entrepreneurs must navigate Israel’s export control laws from the outset to avoid barriers down the line. Prioritizing target markets and crafting the right go-to-market strategy—whether through direct sales, integrators, or local partnerships—is critical, as is understanding each channel’s regulatory landscape.

Decisions around manufacturing—whether to build in-house production lines or rely on subcontractors—can influence the business model significantly. Furthermore, familiarity with defense-grade standards and quality assurance is essential for long-term success.

Israel’s Role in the Global Defense-Tech Movement

As with many other security-related domains, Israel is positioned at the forefront of the global defense-tech boom. The IDF’s exposure to the world’s most complex battlefield scenarios accelerates innovation and gives Israeli companies a decisive edge. The performance of defense giants like IAI, Rafael, and Elbit Systems over the past year illustrates the growing demand for Israeli solutions. This demand stems from both global needs and the distinct strengths of Israeli entrepreneurs—many of whom are military veterans with firsthand experience.

The defense-tech sector isn’t limited to high-tech. Subcontractors supplying raw materials or manufacturing ammunition are also poised to see major growth. With rising demand for national self-sufficiency and full-spectrum readiness, every link in the defense supply chain will matter more.

Amikam Norkin is a former Commander of the Israel Air Force and is currently a Managing Partner at Ace Capital.