Israeli defense-tech startups entice $1b in funding

Israeli protection startups working with the Ministry of Protection Directorate for R&D (DDRD) (MAFAT) have attracted over $1 billion in financing rounds, mergers and acquisitions in 2025. A senior protection official tells “Globes,” “The funding in 2025 has been higher than all earlier years mixed, and the 12 months will not be over but.” In 2024, which was additionally a report 12 months, solely about $150 million was raised. In complete, all funding raised by startups within the discipline in recent times (previous to 2025) amounted to about $422 million.

The quantity can also be spectacular on a world scale. Crunchbase knowledge printed a number of days in the past reveals that the full funding raised by protection startups worldwide for the reason that starting of 2025 amounted to $7.7 billion in practically 100 offers. The principle driver was the 9% development in world protection budgets to about $2.7 trillion – essentially the most important annual soar within the final 30 years, the Stockholm Worldwide Peace Analysis Institute (SIPRI) studies.

“The 2 years of warfare has benefited startups”

Progress is going on regardless of the elemental problem of the sphere, in which there’s a single buyer in Israel: the Ministry of Protection. The main consumer is the Israel Protection Forces (IDF), in addition to safety companies and plenty of armies world wide.

Col. Yishai Kohn, Head of MAFAT’s Planning, Economics & IT Division tells “Globes,” “When a startup needs prospects to purchase from it, there are a number of attainable prospects, and we’re a single deal with. On the similar time, as a result of supervision of the sphere worldwide, there’s a reluctance to spend money on safety applied sciences that aren’t twin (navy and civilian), and till two years in the past, there was no speak of ‘protection tech.’ The 2 years of warfare have benefited startups, as a result of conflicts on the battlefield.”

For the reason that begin of the warfare in October 2023, greater than 130 Israeli startups have been built-in into the warfare effort: about 50% in autonomy and AI (together with drones), about 25% in sensors and detectors (some towards drones and a few for deep-tech detectors), and the remaining for navigation, digital warfare, and quantum options.

“We’ve got no potential or want to affect enterprise, it’s a free market,” stresses Col. Kohn. “We attempt to cooperate as a lot as legally permissible with all of the gamers, and to not say something unhealthy about anybody. If, for instance, we confirm that an organization has obtained orders from us, we’ll confirm. That is necessary for traders. We only in the near past met with a German fund, which requested. Our response offers credibility.”

This credibility with international prospects is mirrored in the truth that out of the $1 billion raised, some $400 million got here from US firm Ondas Holdings. The corporate, which operates within the fields of autonomous drones, safety robotics, and superior communications options, has made a collection of acquisitions in Israel – essentially the most notable of which was the acquisition of Sentrycs, which makes a speciality of anti-drone options primarily based on protocol manipulation (Cyber Over RF), for $225 million. It is a firm whose product can also be utilized by the IDF.

One unicorn and lots of of thousands and thousands of {dollars} in funding

One other standout within the discipline this 12 months is Classiq, which develops software program instruments for quantum computing, and raised $110 million – a few of it from abroad traders. Drone firm Heven turned Israel’s first-ever unicorn within the protection trade, after elevating $100 million at an organization aluation of $1 billion, with US quantum computing firm IonQ main the funding. An identical quantity was raised by Kela, which was based in 2024, and is creating a platform for connecting civilian applied sciences to navy techniques. Traders included Sequoia, Lux Capital, and IQT – the funding arm of the CIA.

Ondas’ important presence displays a broad development within the trade, wherein most startups aren’t techniques of techniques, however the trade is transferring in direction of that. The US firm is accumulating applied sciences by way of acquisitions, however it’s not the one one. Israeli drone firm UVision just lately acquired Israeli firm SpearUAV, which develops tactical assault drones launched from a capsule. SpearUAV raised $20 million in a Collection B spherical in Might final 12 months at a valuation of $80 million.

UVision didn’t disclose the quantity of the acquisition, however “Globes” has realized that it was not decrease than the earlier $80 million valuation. It is a important step, however not the one one which UVision has taken in its efforts to change into a techniques home. About two months in the past, along with US firm Mistral, UVision closed an enormous deal to produce suicide drones to the US Military for $982 million. On the similar time, the corporate is working carefully with German large Rheinmetall, to produce lots of of UVISION’s “Hero” collection of walkie-talkies to a NATO member state. The worldwide media estimates the deal is value lots of of thousands and thousands of euros.

The third main Israeli protection tech firm is Kela, which is creating a variety of SCM (command and management) capabilities on a comparatively small scale, which is able to convey collectively startups, by utilizing open structure. The corporate is striving to change into as in depth an integrator as attainable that can accumulate, for instance, radar, SIGINT, and interception applied sciences, and if the transfer is profitable, Kela will change into an actual rival of Elbit Programs, which operates within the discipline.

Beating the protection giants in tenders

What every of those corporations has in widespread is their shut cooperation with the Ministry of Protection, which advantages them not solely in Israel. Within the first half of 2025 alone, no fewer than 12 Israeli startups signed export agreements in G2G (government-to-government) frameworks – a report that a number of years in the past, would have appeared like a distant dream, when many of the consideration within the discipline was on cybersecurity.

Col. Kohn notes that when the Ministry of Protection works with a startup, it doesn’t take fairness. “We view ourselves as an R&D physique. Typically, we situation corporations with giant provide orders, which isn’t negligible for us both, however this can be a calculated danger designed to supply them with safety. The businesses present traders the availability order.”

Certainly one of MAFAT’s extra sophisticated duties, particularly through the pressures of the warfare, is to influence the safety forces to make use of the techniques. “Capability is restricted, it’s not possible to tackle 200 drone corporations, however it’s creating. Within the counter-drone discipline, we run discipline trials and place them on the border. The restrictions aren’t solely in cash, but in addition within the operational scope that’s attainable.”

On the MAFAT Protection Tech convention in cooperation with the Yuval Ne’eman Science, Know-how and Safety Workshop at Tel Aviv College, the top of MAFAT, Brig. Gen. (res.) Dr. Danny Gold recalled a young for assault drones, which was gained by a number of startups that shaped a consortium to compete with Israel’s greatest three protection corporations (IAI, Elbit and Rafael).

Extra budgets alongside state-guaranteed funding funds

2026 can be difficult by way of safety, but it’s not anticipated to be comparable by way of operational battle and the orders for the earlier two years. Due to this fact, the Ministry of Protection has taken three key steps: At the start, Dr. Gold determined that not less than 10% of the Ministry of Protection’s R&D funds in 2026 will go to startups and to not the three giant corporations, that are already flourishing on account of elevated demand from overseas.

As well as, the Ministry of Protection has joined forces with the Ministry of Finance to determine two state-guaranteed funding funds totaling NIS 200 million. “This can be a distinct 12 months than the earlier one,” says Col. Kohn. “The startups aren’t anticipated to realize the identical backlog of orders. Given the truth that the massive corporations have record-breaking exports, it’s proper to proceed to advertise the (startup) ecosystem.”

The ultimate measure pertains to the API – the Protection Exports Management Division. The Ministry of Protection plans to take away boundaries to advertising some categorized merchandise to greater than 100 nations.

Printed by Globes, Israel enterprise information – en.globes.co.il – on December 8, 2025.

© Copyright of Globes Writer Itonut (1983) Ltd., 2025.