ByANNA AHRONHEIM

JULY 16, 2026 15:50

Israeli defense technology startups partnering with the Defense Ministry secured nearly $3 billion during the opening half of 2026, according to numbers shared at the Haifa DefenseTech Startups and Investors Forum.

This total represents three times the $1 billion collected across the full year of 2025.

In that same timeframe, defense-tech and dual-use firms made up nearly 30 percent of the $8.4 billion in private funding flowing into Israel's hi-tech field. Around 800 startups are now handling direct orders from the ministry.

The forum took place this week at EY's Haifa office and was arranged by HiCenter Ventures, Gornitzky GNY, and EY, drawing entrepreneurs, investors, and leaders from defense and security circles.

"Israel is quickly evolving from a 'Cyber Nation' into a 'Defense-Tech Nation,'" said Ilana Averkin, head of Defense-Tech at HiCenter Ventures.

She cautioned startups against attempting complete end-to-end systems that would pit them against major contractors. Instead, they should create independent, adaptable, and neutral components that integrate smoothly into platforms from firms such as Lockheed Martin, Raytheon, or domestic leaders including Israel Aerospace Industries (IAI), Elbit Systems, and Rafael Advanced Defense Systems.

Global crises

Conflicts in Ukraine, the Persian Gulf, Lebanon, and Gaza have driven higher demand for defense technologies, including those from Israel. Attendees highlighted how Israeli firms can enhance systems amid active fighting, which appeals to overseas buyers.

Lior Hanuka, CEO of HiCenter Ventures, noted that "lessons from operations in the Gaza Strip, Lebanon, and Ukraine have made control of frequencies and the capacity to jam GPS and drones a leading investment focus."

He further observed that "substantial capital is flowing into AI capable of not only processing information but also executing independent real-time choices, such as automatic target ranking, dynamic supply-chain oversight, and forecasting issues in weapons platforms."

Major contractors are teaming with defense-tech firms globally. Dr. Moshe Shuker, senior vice president for Research and Development at Rafael, stated that the company has "greatly broadened" its ties with startups through component integration and wider partnerships on key programs.

"Rafael ranks among the world's top defense industries and aims to serve as a key pillar of Israel's security via distinctive and innovative technology. In recent years, Rafael's offerings have led in defending Israel technologically, and we work to maintain that edge."

Shuker added that adapting to the defense-tech space allows "the link between nimble startups and established development teams and defense firms to shorten the journey from concept to operational technology."

Central industry

Hanuka pointed out that funding is shifting toward software-driven platforms, such as battlefield operating systems, secure cloud links, and autonomous drone and robot software. He also noted rising interest in AI for instant decisions and predictive upkeep.

"Items like battlefield operating systems, encrypted cloud communications, and autonomous software for drones and robots are reaching strong valuations," he said.

Adv. Ariel Sagee of Gornitzky observed that government entities, including the Israel Innovation Authority, the Defense Ministry, and the Directorate of Defense Research and Development (DDR&D), are adopting a more active stance in backing defense-tech firms.

"We see a basic change in how government bodies interact with defense and technology areas," he said.

He explained that "entities once seen as heavily bureaucratic, such as the Israel Innovation Authority, the Defense Ministry, and especially DDR&D, are now far more proactive. Their emphasis is on speeding innovation, encouraging partnerships, and easing obstacles for sector companies."

The figures follow a report from the Aaron Institute for Economic Policy at Reichman University showing a notable increase in hi-tech employment in Israel, particularly in defense-tech. The study, cited by Ynet, reported 424,000 hi-tech workers, marking a 6.2 percent gain.

This workforce growth produced a 32 percent rise in office space leased by defense companies in the first half of the year. Data from Colliers Israel showed the three main defense firms - Rafael, Elbit, and IAI - along with defense-tech startups leasing over 140,000 sq.m., up from roughly 106,000 sq.m. in the second half of 2025.

Investment focus and regional development

While most firms remain in central Israel (about 80 percent per the report), Hanan Markovitz, CEO of the Haifa Economic Corporation, stressed that bolstering Haifa and the North as a tech center supports national resilience and urged a national effort to draw development hubs and funding to the area.

"Israel cannot keep concentrating top security human and technological resources in the center. Support for Beersheba is positive, yet national resilience also needs a robust center in Haifa and the North," he said.

HiCenter Ventures was founded by the Haifa Economic Corporation and the city of Haifa to nurture the local startup scene. Since 2021, it has backed and invested in 104 startups that raised over $300 million. Its investor network, HiFund, includes roughly 1,200 investors and 300 strategic partners and investment groups.

In 2025, HiCenter backed 24 startups, comprising 19 new portfolio firms and five follow-on rounds. Those companies secured about $90 million in extra funding that year.

Averkin noted that HiCenter intends to support 10 defense-tech startups this year and will help with capital raising, proof-of-concept efforts, export permits, and production.