Israeli Hi-Tech Industry Shows Resilience Amid Security Challenges

In the first quarter of 2026, Israel's hi-tech industry demonstrated a notable increase in capital raising, despite ongoing security escalations and the war with Iran. According to a report by LeumiTech, the high-tech banking arm of Bank Leumi, and IVC, Israeli tech companies raised approximately $3.1 billion across 98 funding rounds, marking a 34% increase compared to the same period in the previous year. This funding volume indicates a relative stability in investment, averaging around $2.7 billion per quarter over the past two years, and surpassing levels recorded before the COVID-19 pandemic.

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Despite the overall increase in capital, the data reveals a structural shift within the market. The number of completed deals has decreased significantly, with only 98 deals in the first quarter, approximately 35% lower than the average recorded in 2020. This trend suggests that more capital is being concentrated in fewer companies, primarily through larger funding rounds. Early-stage funding, particularly up to Series A, accounted for over 40% of the total capital raised, approximately $1.3 billion. Conversely, mid-stage rounds (Series B and C) saw a decline, comprising about 29% of the market, while late-stage rounds remained stable at the same percentage.

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The cybersecurity sector continues to dominate the Israeli tech landscape, attracting around $1.2 billion, or 40% of total funding. Additionally, the generative artificial intelligence sector is gaining traction, capturing 16.1% of the capital raised in the quarter. These sectors are becoming increasingly attractive to international investors, although there has been a gradual decline in the share of foreign investment. In the first quarter of 2026, foreign investors accounted for 65.9% of total investment, down from approximately 73% over the past decade. This shift indicates a growing reliance on local funds, which are playing a more significant role during periods of uncertainty.

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Maya Eisen-Zafrir, CEO of LeumiTech, commented on the emerging trends, stating, “We continue to see Israeli entrepreneurs demonstrating resilience in a reality of uncertainty and challenging macroeconomic conditions.” She emphasized the importance of careful capital management and noted the encouraging trend of increased involvement from local funds, particularly in early-stage investments.

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While the data reflects a positive outlook for the Israeli hi-tech sector, some analysts express concern regarding the concentration of capital in fewer companies. Critics argue that this trend could stifle innovation and limit opportunities for emerging startups, potentially impacting the long-term growth of the industry.

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The Israeli hi-tech industry is navigating a complex landscape marked by security challenges and shifting investment dynamics. The increase in funding, coupled with a concentration of capital in key sectors, highlights both resilience and the need for strategic management among entrepreneurs in the face of uncertainty.

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