Israel Innovation Authority 2025 High-Tech Report

17/09/2025

Record Year in Exits and Deep-Tech Growth; Stagnation in Output, Employment, and VC Fundraising

Comprehensive analysis shows Israel leading globally in Deep-Tech outside the U.S., attracting billions in AI, semiconductors, and medical devices, even as job growth slows and new venture creation declines

The Israel Innovation Authority today announced the release of its annual Status Report on Israeli High-Tech 2025, presenting both resilience and challenges across the sector.

For the first time, the Status Report is published alongside the Israeli Deep-Tech 2025 Report, produced with international firm DealRoom. The comprehensive analysis shows that about 1,500 Deep-Tech companies currently operate in Israel, raising over $28 billion between 2019 and 2025. This makes Israel the leading Deep-Tech fundraising hub in the Western world outside the United States.

According to the report, the cumulative valuation of private Israeli Deep-Tech companies has surpassed $177 billion, 15 times higher than a decade ago. The sector has already produced 39 unicorns and centaurs (companies with revenues above $100 million), the report confirms, with leading fields including AI, medical devices, semiconductors, cybersecurity, and AgriFood. Additionally, the report shows that Israel attracts ~20% of global cyber investments and ~10% of global medical devices and AgriFood investments.

Against this backdrop, the report highlights mixed macro trends. High-Tech output has remained unchanged for two years, holding steady at 17% of GDP. The share of High-Tech employees in the workforce is stagnant, with R&D roles down 6.5%. Meanwhile, Israeli VC fundraising and new startup creation have sharply declined. Yet startup fundraising continues to recover: Q2 2025 was the strongest since 2022, and the year is expected to set an all-time record for High-Tech exits.

Gila Gamliel, Minister of Innovation, Science and Technology: “Even in challenging years, when Israel is fighting a war on seven fronts and contending with global antisemitism, Israeli innovation proves its strength and continues to push boundaries. The fact that we have grown in the number of exits, lead in Deep-Tech, and keep producing breakthrough ideas is evidence of our creative and human strength. Our duty is to continue investing in Human Capital, empowering research and development, and strengthening international cooperation, so that Israel not only preserves its advantage but also stands at the forefront of global innovation and growth in the coming decade.”

Dr. Alon Stopel, Chair of the Israel Innovation Authority: “Israel’s High-Tech sector is at an inflection point with mixed trends. On the one hand, we see exceptional resilience in a complex and unprecedented geopolitical and economic reality for a nation whose economy is based on technology and advanced industry. This resilience is reflected, among other things, in the recovery of later-stage fundraising and Israel’s strong position among global innovation hubs. On the other hand, the data indicates a worrying slowdown in employment and entrepreneurship. Israel possesses advanced capabilities and a clear value proposition in frontier domains such as semiconductors, quantum, and medical devices. With a series of ‘outside-the-box’ measures, and in light of global shifts that recognize technology as a critical component of national security, we must drive deep internal processes while advancing international cooperation with allies in diverse frameworks. We are committed to ensuring that Israel leverages its strengths and acts to maximize the full potential of all the technological segments the Israeli ecosystem has to offer in Deep-Tech, Artificial Intelligence, and scientific innovation, in order to maintain a competitive edge into the next decade.”

Dror Bin, CEO of the Israel Innovation Authority: 2025 reveals the dual story of Israeli High-Tech. Israel is consolidating its position as a global Deep-Tech center, second only to the U.S. in the Western world, with more than 1,500 active companies and a share exceeding one-third of all capital invested in local High-Tech. Strong fundraising in AI and quantum places us on the front line of global innovation. However, the report points to troubling trends. High-Tech output has been stagnant for two years; the number of R&D employees is shrinking; new venture creation is lower than in the previous decade; and VC fundraising is decreasing. These are not marginal data points but indicators of risk that we take very seriously. In parallel, we see a global paradigm shift. Governments are investing hundreds of billions, becoming direct players in technology and shaping national value chains in areas like semiconductors, AI, and energy and Israel must respond to these shifts to avoid losing its comparative advantage. This is a moment of truth that only a broad strategic move, which involves combining public policy with private investment, will ensure that today’s achievements become the foundation for growth and leadership in the race that defines the economy of the future.”

Key Findings

  • High-Tech output: ~NIS 317 billion in 2024 (17% of Israel’s GDP) –  virtually unchanged for two consecutive years.
  • Employment: 403,000 employed in High-Tech in H1 2025 (11.5% of the workforce), a slight rise vs. 391,000 in 2024. Since 2021, High-Tech’s share of total employment has been stagnant, and H1 2025 saw a 6.5% decline in R&D roles year-over-year.
  • Employment growth rate: Fell to <2% per year on average since 2023, compared with >5% for most of the previous decade.
  • High-Tech exports: $78B in 2024 (+5.6% vs. 2023). High-Tech accounted for 57% of all Israeli exports in H1 2025- the highest share ever recorded. Export mix: 72% software services, 28% High-Tech industry; industrial High-Tech exports have been stagnant for about a decade. Only 6.6% of Israeli High-Tech exports are exposed to “Trump Tariffs.”
  • Startup investment: Fundraising by Israeli startups returned to 2019–2020 levels. In 2024 Israel ranked the 5th-largest hub globally with $10.6B raised (after San Francisco, New York, London, Boston). Concentration remained high: in 2025, 3 of every 5 dollars raised went to cybersecurity or enterprise software.
  • Exits: Second consecutive year of rising exit values; 2025 is expected to be an all-time record for Israeli High-Tech.
  • Venture-capital funds: Capital raised by Israeli VCs in 2024 fell by ~80% vs. the 2022 peak; the average fund size in 2023–2025 dropped to $60–65M (vs. ~$90M in 2017–2022). The decline in Israel is sharper than in the U.S. and Europe.
  • New venture creation: About 500 new startups were founded in 2024, compared with 1,000+ a decade ago.
  • Deep-Tech:
    • ~1,500 Israeli Deep-Tech companies; $28.6B raised since 2019, about 35% of all capital raised by Israeli High-Tech companies. This places Israel #1 outside the U.S. for Deep-Tech fundraising.
    • Investments each year came from ~300 – 400 different VC funds, ~25% of them Israeli.
    • Over the past decade, an average of 28 Deep-Tech exits occurred annually (avg. ~$220M per exit); 17 Deep-Tech exits were recorded in 2024.

Detailed Findings

Output and Employment

Israel’s High-Tech output in 2024 totaled approximately NIS 317 billion (17% of GDP). This figure is virtually unchanged from 2023 (NIS 315 billion), indicating two consecutive years of stagnation. Employment shows a similar pattern: in H1 2025, the sector employed about 403,000 people (11.5% of total employment). However, the number of employees in R&D roles declined by 6.5% year-over-year. Since 2023, the annual growth rate of High-Tech employment has fallen to below 2%, compared with over 5% for most of the previous decade. The implication is that High-Tech, which previously led employment growth, is now stagnant.

Exports

By contrast, High-Tech’s share of Israeli exports continues to rise. In 2024, High-Tech exports reached $78 billion, a 5.6% increase versus 2023. In H1 2025, High-Tech accounted for 57% of all Israeli exports, the highest share ever recorded.

The export mix points to a clear trend: 72% software services versus 28% High-Tech industry. This means Israel is increasingly reliant on software services exports, while the High-Tech industry, including the defense industry, has been relatively stagnant. For the first time, the report also estimates export exposure: only 6.6% of Israeli High-Tech exports are exposed to “Trump Tariffs,” underscoring the economy’s sensitivity to shifts in global trade policy.

Startup Investments

On the positive side, investment in Israeli startups shows a recovery: 2024 fundraising returned to 2019–2020 levels. Israel maintained its position as the 5th-largest capital-raising hub globally, after San Francisco, New York, London, and Boston. That said, concentration remains high: in 2025, 3 out of every 5 currency units raised went to cybersecurity or enterprise software, signaling less dispersion across new technology domains and a decline in innovation diversity.

Venture-Capital Funds

A concerning trend continues in venture capital: during 2023–2025, the average Israeli fund size fell sharply relative to 2017–2022. While peak periods saw average fund sizes of roughly $90 million, in recent years the average has dropped to $60–65 million. The decline in Israel is sharper than in the U.S. and Europe, where decreases occurred but were not as pronounced.

Exits

In H1 2025, Israel recorded the largest acquisition in the history of its High-Tech sector, with Google acquiring Wiz for about $32 billion. As a result, 2025 is expected to be a record year for Israeli High-Tech in terms of total M&A value.

In 2024, there were 100+ first-time M&A deals of private Israeli High-Tech companies totaling about $12 billion, an increase in deal count compared with 2023 (85 deals totaling ~$5.6 billion). The aggregate purchase value of private Israeli technology companies in 2024 was the highest of the decade up to that year, comparable to 2021. However, the annual deal count since 2023 remains below the long-term average of ~140 deals per year observed in 2015–2022.

New Venture Creation

New entrepreneurship has been declining for multiple years. In 2024, about 500 new startups were founded in Israel, compared with 622 in 2023 and 1,000+ a decade ago, meaning the number of new companies has more than halved over ten years.

Moreover, most new startups are launched in already concentrated domains, such as enterprise software, fintech, e-commerce, and cybersecurity rather than in newer, emerging technology areas.

Deep-Tech

Roughly 1,500 Deep-Tech companies operate in Israel. Of these, about 1,000 are in early fundraising stages (up to $15 million raised). Some are further along: 120 companies have raised $100 million+, and 39 have reached unicorn status or annual sales above $100 million.

Since 2019, Israeli Deep-Tech companies have raised $28.6 billion, equal to ~35% of all capital raised by Israeli High-Tech companies. The investment breakdown shows:

  • 15.3% to medical devices
  • 11.9% to AI infrastructure
  • 10.5% to pharma & biotech
  • 9.8% to semiconductors

The data presents a paradoxical picture of Israel’s high-tech industry. While GDP contribution and employment are stagnant, the sector is also demonstrating recovery and global leadership in investments and record-breaking export figures.

Despite the challenges. such as a drop in the number of new startups, smaller VC funds, and reduced diversity in innovation fields, especially in deep-tech, Israeli high-tech remains a central pillar of the economy. It accounts for 57% of total exports, is on track for a record year in M&A, and maintains global leadership in tech investments, especially relative to national output.

Key findings of Deep-Tech report prepared by DealRoom:

Core strengths

  • AI and Medical Devices emerge as Israel’s strongest deep-tech domains, leading both in capital raised and in value creation.
  • In cybersecurity, Israel commands over 20% of global deep-tech investment, the highest global share.
  • In medical devices and AgriFood, Israel holds a global share of 9–10% of deep-tech investments.

Unicorns and Centaurs

Israel is home to 39 deep-tech unicorns and centaur companies (startups with revenues above $100M):

  • 6 in semiconductors
  • 5 in AI infrastructure

Investment & Capital Trends

  • Since 2019, Israeli deep-tech and life sciences companies have raised over $28 billion, more than any Western hub outside the U.S.
  • Israel ranks 5th globally in total deep-tech VC investments and per capita funding, with $2.9K per capita.
  • In 2025, investment momentum is rebounding: over $2.5 billion raised by August, signaling a return to pre-2021 levels.

Sectoral Trends

  • AI Infrastructure: The highest value creator among all sectors, yet Israel accounts for less than 2% of global investments in this area.
  • Semiconductors: Delivered major economic outcomes over the past decade, but now represent a smaller share of new startups.
  • Medical Devices: Israel attracts ~10% of global investment in this space and shows strong startup formation activity.
  • AgriFood: Israel is notable for innovation in alternative proteins, precision agriculture, and food biotech, attracting ~9% of global investment in deep-tech AgriFood startups.
  • Quantum: Still small (just 10+ companies) but with significant funding and international recognition. 2025 marks a record year, with over $300M in reported quantum investments.

Valuation and Economic Impact

  • The valuation of private deep-tech companies now stands at $119 billion, 15x more than a decade ago.
  • When including exits and IPOs, the total deep-tech value reaches $177 billion, most of it generated by startups founded in the past 10 years.

Foreign Investment Dependency

  • Foreign capital dominates the Israeli deep-tech landscape:
    • Local capital share drops from 35% at early stages to just 15% in later rounds.
    • Compared to other global hubs, Israel relies more heavily on foreign funding than nearly any other region.

Exits and IPOs

  • Since the 2021 IPO boom (e.g., SentinelOne, $8.9B), exit activity has slowed significantly.
  • Still, notable large-scale exits occurred in 2024–2025, particularly in AI, cyber, semiconductors, and medical devices:
    • Run: AI → acquired by NVIDIA for $700M
    • V-Wave → acquired by Johnson & Johnson for $600M
    • Noname Security → acquired by Akamai for $450M

In conclusion, Israel stands out as the world’s leading deep-tech hub outside the U.S., with dominant strengths in AI, semiconductors, cybersecurity, and medical devices. The country benefits from high investment volumes, a dynamic innovation ecosystem, and a significant global footprint. However, the heavy reliance on foreign capital remains a strategic vulnerability. After a multi-year decline, 2025 signals a potential turning point, with renewed investment growth and Israel poised to solidify its position as a global deep-tech powerhouse.