Israeli defense-tech startups entice $1b in funding
Israeli protection startups working with the Ministry of Protection Directorate for R&D (DDRD) (MAFAT) have attracted over $1 billion in financing rounds, mergers and acquisitions in 2025. A senior protection official tells “Globes,” “The funding in 2025 has been higher than all earlier years mixed, and the 12 months shouldn’t be over but.” In 2024, which was additionally a document 12 months, solely about $150 million was raised. In whole, all funding raised by startups within the area lately (previous to 2025) amounted to about $422 million.
The quantity can also be spectacular on a global scale. Crunchbase knowledge revealed just a few days in the past exhibits that the overall funding raised by protection startups worldwide because the starting of 2025 amounted to $7.7 billion in practically 100 offers. The principle driver was the 9% development in international protection budgets to about $2.7 trillion – probably the most important annual soar within the final 30 years, the Stockholm Worldwide Peace Analysis Institute (SIPRI) studies.
“The 2 years of struggle has benefited startups”
Development is happening regardless of the elemental problem of the sector, in which there’s a single buyer in Israel: the Ministry of Protection. The main consumer is the Israel Protection Forces (IDF), in addition to safety companies and lots of armies world wide.
Col. Yishai Kohn, Head of MAFAT’s Planning, Economics & IT Division tells “Globes,” “When a startup needs prospects to purchase from it, there are a number of potential prospects, and we’re a single deal with. On the identical time, as a result of supervision of the sector worldwide, there’s a reluctance to put money into safety applied sciences that aren’t twin (navy and civilian), and till two years in the past, there was no discuss of ‘protection tech.’ The 2 years of struggle have benefited startups, as a result of conflicts on the battlefield.”
For the reason that begin of the struggle in October 2023, greater than 130 Israeli startups have been built-in into the struggle effort: about 50% in autonomy and AI (together with drones), about 25% in sensors and detectors (some towards drones and a few for deep-tech detectors), and the remainder for navigation, digital warfare, and quantum options.
“We now have no means or want to affect enterprise, it’s a free market,” stresses Col. Kohn. “We attempt to cooperate as a lot as legally permissible with all of the gamers, and to not say something dangerous about anybody. If, for instance, we confirm that an organization has acquired orders from us, we’ll confirm. That is necessary for traders. We only recently met with a German fund, which requested. Our response gives credibility.”
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This credibility with overseas prospects is mirrored in the truth that out of the $1 billion raised, some $400 million got here from US firm Ondas Holdings. The corporate, which operates within the fields of autonomous drones, safety robotics, and superior communications options, has made a collection of acquisitions in Israel – probably the most notable of which was the acquisition of Sentrycs, which makes a speciality of anti-drone options primarily based on protocol manipulation (Cyber Over RF), for $225 million. This can be a firm whose product can also be utilized by the IDF.
One unicorn and tons of of thousands and thousands of {dollars} in funding
One other standout within the area this 12 months is Classiq, which develops software program instruments for quantum computing, and raised $110 million – a few of it from abroad traders. Drone firm Heven grew to become Israel’s first-ever unicorn within the protection business, after elevating $100 million at an organization aluation of $1 billion, with US quantum computing firm IonQ main the funding. An analogous quantity was raised by Kela, which was based in 2024, and is creating a platform for connecting civilian applied sciences to navy programs. Buyers included Sequoia, Lux Capital, and IQT – the funding arm of the CIA.
Ondas’ important presence displays a broad pattern within the business, by which most startups will not be programs of programs, however the business is transferring in direction of that. The US firm is accumulating applied sciences via acquisitions, however it’s not the one one. Israeli drone firm UVision just lately acquired Israeli firm SpearUAV, which develops tactical assault drones launched from a capsule. SpearUAV raised $20 million in a Collection B spherical in Might final 12 months at a valuation of $80 million.
UVision didn’t disclose the quantity of the acquisition, however “Globes” has discovered that it was not decrease than the earlier $80 million valuation. This can be a important step, however not the one one which UVision has taken in its efforts to develop into a programs home. About two months in the past, along with US firm Mistral, UVision closed an enormous deal to produce suicide drones to the US Military for $982 million. On the identical time, the corporate is working intently with German big Rheinmetall, to produce tons of of UVISION’s “Hero” collection of walkie-talkies to a NATO member state. The worldwide media estimates the deal is value tons of of thousands and thousands of euros.
The third main Israeli protection tech firm is Kela, which is creating a variety of SCM (command and management) capabilities on a comparatively small scale, which can convey collectively startups, through the use of open structure. The corporate is striving to develop into as in depth an integrator as potential that may accumulate, for instance, radar, SIGINT, and interception applied sciences, and if the transfer is profitable, Kela will develop into an actual rival of Elbit Techniques, which operates within the area.
Beating the protection giants in tenders
What every of those corporations has in frequent is their shut cooperation with the Ministry of Protection, which advantages them not solely in Israel. Within the first half of 2025 alone, no fewer than 12 Israeli startups signed export agreements in G2G (government-to-government) frameworks – a document that a number of years in the past, would have appeared like a distant dream, when a lot of the consideration within the area was on cybersecurity.
Col. Kohn notes that when the Ministry of Protection works with a startup, it doesn’t take fairness. “We view ourselves as an R&D physique. Typically, we concern corporations with giant provide orders, which isn’t negligible for us both, however this can be a calculated threat designed to supply them with safety. The businesses present traders the provision order.”
Certainly one of MAFAT’s extra difficult duties, particularly throughout the pressures of the struggle, is to steer the safety forces to make use of the programs. “Capability is proscribed, it’s unimaginable to tackle 200 drone corporations, however it’s creating. Within the counter-drone area, we run area trials and place them on the border. The constraints will not be solely in cash, but in addition within the operational scope that’s potential.”
On the MAFAT Protection Tech convention in cooperation with the Yuval Ne’eman Science, Know-how and Safety Workshop at Tel Aviv College, the top of MAFAT, Brig. Gen. (res.) Dr. Danny Gold recalled a young for assault drones, which was gained by a number of startups that shaped a consortium to compete with Israel’s greatest three protection corporations (IAI, Elbit and Rafael).
Extra budgets alongside state-guaranteed funding funds
2026 might be difficult by way of safety, but it’s not anticipated to be related by way of operational battle and the orders for the earlier two years. Subsequently, the Ministry of Protection has taken three key steps: At the start, Dr. Gold determined that at the least 10% of the Ministry of Protection’s R&D price range in 2026 will go to startups and to not the three giant corporations, that are already flourishing because of elevated demand from overseas.
As well as, the Ministry of Protection has joined forces with the Ministry of Finance to ascertain two state-guaranteed funding funds totaling NIS 200 million. “This might be a unique 12 months than the earlier one,” says Col. Kohn. “The startups will not be anticipated to attain the identical backlog of orders. Given the truth that the massive corporations have record-breaking exports, it’s proper to proceed to advertise the (startup) ecosystem.”
The ultimate measure pertains to the API – the Protection Exports Management Division. The Ministry of Protection plans to take away limitations to advertising and marketing some categorised merchandise to greater than 100 nations.
Printed by Globes, Israel enterprise information – en.globes.co.il – on December 8, 2025.
© Copyright of Globes Writer Itonut (1983) Ltd., 2025.
