(Photo credit: Flash90 via JNS)
Avi Hasson
After recently marking Rosh Hashanah, it is impossible not to look back on the two years since Oct. 7 and the ways that they have reshaped Israel. What began as a period of profound shock has become a test of endurance and adaptability for an innovation ecosystem that sits at the core of Israel’s future.
The disruptions came quickly. Tens of thousands of skilled workers were called into reserve duty, pulling talent away from companies overnight. Air travel faltered, at times cutting Israel off from the world, especially during the war with Iran back in June. Investors hesitated, drawing out decisions and channeling capital to safer, later-stage bets. Startups at the beginning of their journey felt the strain most acutely, with many reduced to running on determination alone.
Yet in the face of crisis, Israeli innovation delivered. In the first half of 2025, Israeli tech raised $9.5 billion across 367 rounds of investment and funding, a 58% increase from the previous half. Mega-rounds returned with strength, totaling $4.7 billion across 13 deals, while mergers and acquisitions surged to $38.9 billion, the strongest half-year ever recorded, anchored by Google’s $32 billion purchase of Wiz, the largest exit in Israel’s history. These are the figures of a sector pushing forward in defiance of circumstances.
Behind every deal and every round lies a story of founders pitching from reserve duty, investors making bold commitments in volatile times and teams scattered across continents working to keep companies alive. The statistics are striking, but the determination that produced them is what defines this performance.
War turned defense into a live laboratory, accelerating advances in AI-driven systems, unmanned platforms and cybersecurity. Many of these technologies are already being applied to civilian life, from securing hospitals to managing energy grids. Agility, long seen as a cultural trait, became a survival skill as teams learned to operate with fractured workforces and disrupted supply chains. Even amid uncertainty, new companies emerged. Reserve service exposed thousands to urgent problems that sparked ideas for new ventures, and the result is a start-up baby boom.
The true measure of this period will not be the startups that survived the storm but the institutions built once the skies cleared. Israel has always thrived on urgency; however, urgency cannot be our only strategy. Renewal requires patience, long-term vision and a commitment to translate battlefield innovation into nation-building strength. The baby boom must grow into a generation of companies and policies designed to outlast conflict.
The past two years have revealed more than grit; they have also revealed overdependence. Israel’s economy has leaned heavily on tech, with high-tech contribution to GDP expanding nearly 12% in just the first quarter of 2025, while the broader economy barely moved.
That imbalance creates a fragile foundation for national growth. Capital is concentrating in a handful of mature sectors, while others that are central to society remain underfunded. Health tech is the clearest example. Despite being Israel’s largest sector by company count, it drew just $630 million in the first half of 2025, its weakest showing in five years.
The sector’s potential is vast, from medical AI to preventive care, but without stronger investment and policy support, that promise will not translate into strength for citizens.
Our neighbors understand this moment and are moving aggressively. Saudi Arabia and the United Arab Emirates are pouring billions into artificial intelligence, building data infrastructure and securing partnerships with U.S. tech giants. Israel’s national AI plan, by contrast, is budgeted at less than $300 million. The gap is stark. Saudi Arabia now ranks first globally in AI policy while Israel ranks 32nd. For a country that has built its reputation on technological daring, this complacency is a warning sign. The race for AI leadership is unfolding now, and without a course correction, Israel risks falling behind just as the next great frontier is being drawn.
The story of the past two years is one of disruption and strain, reinvention and determination. Fragility was exposed in our dependence on a single sector, and in how deeply reserve duty and investor caution reverberated across the ecosystem. Strength was proven in the creativity, urgency and drive of innovators who found ways to adapt and deliver.
Turning to 5786, the task is to turn hard-earned endurance into renewal and to use the ingenuity that carries us through crisis to build a stronger society. Innovation must reach beyond boardrooms and global markets into classrooms, hospitals and peripheral communities. We cannot return to business as usual. War has tested us and changed us.
The question now is how we use that experience to rebuild with intention.
Avi Hasson is the CEO of Startup Nation Central, a Tel Aviv-based nonprofit organization that promotes Israeli innovation around the world.
