Preface

The world is undergoing a profound transformation, one directly impacting the high-tech industry. Three dramatic processes are reshaping reality:

A shift in the global investment climate, reflected in growing investor caution and a move toward focused investments in fields with proven potential;

The transition to Artificial Intelligence and deep-tech, which are driving fundamental changes in the structure and nature of high-tech, and which are characterized by long time-to-market, significant capital requirements, and the need for personnel with advanced academic degrees;

Massive state injection as part of a global technological arms race, with world powers investing billions to maintain an advantage in strategic fields. While Israel ranks among the global leaders in terms of investments and the number of startups in AI and deep-tech fields, it must nevertheless take action to maintain its advantage in the face of intensifying competition.

This report presents the annual overview of Israeli high-tech. It should be read against the backdrop of the processes described above, which influence both macro-economic data and the future trajectory of the sector. The effects of AI are not yet fully reflected in this report, but it is clear they will become increasingly prominent and significant in future editions.

Israeli high-tech continues to serve as the primary growth engine of the national economy, yet in 2025, it stands at a crossroads. After a decade of accelerated growth, the sector faces a complex reality: on the one hand, a recovery in startup fundraising and global leadership in R&D, Artificial Intelligence, and deep-tech; on the other hand, stagnation in employment and output, a decline in new company formation, and a sharp drop in fundraising by Israeli venture capital funds.

The data in this report illustrates the sector’s importance to Israel’s economy: high-tech accounts for approximately 17% of the country’s GDP and more than half its exports – exceptional figures by global standards. However, after a decade of rapid expansion, the growth in high-tech employment has slowed to less than 2% a year. In the first half of 2025, approximately 403,000 people were employed in Israeli high-tech (about 11.5% of the workforce), but the number of R&D jobs declined by 6.5% compared to the same period last year.

Meanwhile, high-tech exports continue to break records: in 2024, exports totaled USD 78 billion, 72% of which came from software services. In the first four months of 2025, this upward trend continued, with high-tech exports reaching 57.2% of Israel’s total exports – the highest ratio ever recorded, compared to 56.4% for all of 2024.

On the positive side, startup fundraising has recovered to 2019-2020 levels, positioning Israel as the fifth-largest hub in the world in this metric. At the same time, 2025 is emerging as a record year for Israeli high-tech mergers and acquisitions, with deals of unprecedented scale such as Wiz and CyberArk. However, the long-term decline in new company formation continues: the number of new startups is less than half the number of a decade ago, and most new companies are established in already saturated fields – organizational software, fintech, e-commerce, and cyber.

The deep-tech sector in Israel is establishing itself as a central pillar of local innovation, with a growing presence on the international stage. A joint study by the Innovation Authority and Dealroom shows that more than 1,500 deep-tech companies are active in Israel, developing complex, R&D-intensive technologies requiring long maturation periods, significant capital, and highly skilled human capital. Since 2019, these companies have raised over USD 28 billion – about 35% of the total capital raised by Israeli high-tech companies – positioning Israel as the leading deep-tech hub worldwide outside the United States.

To strengthen this position of strength, the Innovation Authority is allocating significant resources: the Startup Fund, launched in 2024, invests in early-stage deep-tech companies operating in sectors with low private capital availability. In addition, the Authority is launching a new initiative within the Yozma Fund for direct investment of NIS 250 million (a Fund of Funds) in deep-tech funds, aimed at supporting the ability of specialized deep-tech funds to raise their next funding.

Furthermore, the Authority is advancing national programs in fields of Artificial Intelligence, bio-convergence, quantum computing, and climate, while investing in advanced technological infrastructure such as a supercomputer for training large models and laboratories in the fields of bio-devices and bio-chips.

The Innovation Authority is working to strengthen Israel’s position as a global innovation power: we are reinforcing funding sources for early-stage companies, incentivizing the establishment of new funds, and investing in infrastructure for breakthrough technologies. These steps, alongside our inherent advantages – leadership in R&D, a strong entrepreneurial ecosystem, and proven technological capabilities – enable Israel not only to preserve its already strong position, but also to lead the next wave of global innovation.

In the face of global tectonic shifts, Israel requires both a dynamic and creative strategy and significant investment to address the present period’s complex challenges: accelerated investments in strategic fields, development of advanced technological infrastructures, and ongoing fostering of the entrepreneurial ecosystem and Israeli human capital across all sectors of society. High-tech is Israel’s most important national resource today. Preserving its status as a growth engine requires continued proactive, coordinated, and strategic action.