The Case for Optimism

As head of the Israel Innovation Authority, Dror Bin has a uniquely informed vantage point on the full breadth of Israel's economy—including its crucial high-tech sector. Although fully aware of the challenges Israel is facing at this point in time, Bin is confident that Israel's tech ecosystem is poised to continue flourishing as one of the world's most innovative tech hubs.

Challenging times

It is hardly a secret that the entire Israeli economy has been severely impacted by the horrific events of October 7, 2023 and their aftermath. Dror Bin views the disruptions caused by workers' frequent absences as one of the most difficult challenges Israeli industry has had to face. "Not only did a large share of the workforce serve in the army reserves for extensive periods of time; many people worked from home and had to care for their children while schools were closed for months at a time. Small startups found it particularly challenging to carry on while so many of their employees were unable to work normally," he says.

Another obstacle was that travel in and out of Israel was severely hampered for most of this period, with frequent restrictions imposed on Ben-Gurion Airport due to security concerns and the cancellation of flights by foreign carriers. "As a result, potential investors and business partners were unable to visit Israeli companies and carry out due diligence, and Israeli entrepreneurs and executives couldn't travel abroad to raise funds, meet clients and partners, or attend important conferences," Bin explains.

There were, however, several silver linings: most importantly, the geopolitical risk facing Israel has diminished in the last few years, since countries and organizations that, for decades, had been posing serious threats to the region's stability have been substantially defused. "Two and a half years ago, our security was much worse," Bin confirms, adding that another outcome of the long war is that the whole world witnessed Israel's remarkable technological capabilities. "Israel's advanced technologies were clearly on display, and not just the Defense Tech industries. Our companies attracted a great deal of attention, and many investors were fascinated by these exceptional abilities," he points out.

The best year ever

In fact, Dror Bin paints an optimistic picture of Israel's tech ecosystem—an outlook firmly grounded in concrete data. "2025 was one of the best years for Israel's high-tech industry. Acquisitions of Israeli companies reached an all-time high, surpassing $80 billion. This was far more than the second most successful year for Israeli exits, 2017, when acquisitions totaled $22 billion," he notes. The lion's share of the $80 billion spent on acquiring Israeli companies in 2025 can be attributed to three mega-exits: Google bought the cybersecurity company Wiz for a whopping $32 billion, the largest exit in Israeli history; Palo Alto Networks acquired the identity security company CyberArk for $25 billion; and ServiceNow paid $7.75 billion for the device security firm Armis.

Another encouraging figure is that the amount of money that early-stage Israeli startups were able to raise in 2025 surged to $14 billion—similar to the pre-war levels of 2021-22. More significantly, according to Bin, is the fact that the Israel Innovation Authority received three times more funding requests in 2025 than it did in 2023 from entrepreneurs interested in incubating a new company. The Innovation Authority's Start-Up Fund offers NIS 200,000 through its Ideation Program to people with good technological ideas so that they can develop their innovation before they establish a startup.

"Our explanation for this huge jump in funding requests is that people were forced to leave their comfort zones during the war. They met people they would not have otherwise met, and encountered needs and problems they would not have otherwise been aware of. This encouraged and accelerated the ideation process," Bin conjectures.

The most mindboggling fact of all is that 2025 marked the first reversal in a decade-long decline in the number of startups founded annually in Israel. "In 2014, 1,400 new startups were established, and since then the number of new startups founded every year decreased," Bin elaborates. "This was true all over the world, and not just in Israel. By 2024, only around 500 new companies were founded locally. But in 2025, this pattern was reversed, with approximately 600 new startups founded that year—despite the ongoing war."

Although many companies are incorporated overseas, they usually conduct their R&D operations in Israel, and their intellectual property (IP) is registered in Israel. "If they want to receive support from the Israel Innovation Authority, their IP must be here. Salaries are paid here and, if they are eventually acquired by a foreign company, the taxes will go into Israel's coffers," says Bin.

These figures underscore the resilience of Israel's high-tech ecosystem across the entire value chain—from founding new startups and raising capital to achieving successful exits.

At the same time, however, in the past two years the number of workers in Israel's high-tech sector has stagnated. Around 11% of the whole population is employed in high-tech—the largest proportion in the world—and today there are approximately 400,000 high-tech workers in Israel, double the number that worked in this sector in 2014. However, this number hasn't grown since 2024. There are several possible explanations, including the volatile situation in Israel and globally in the last few years, and workers being replaced by AI (although a study shows that there is no evidence of this occurring yet). The Israel Innovation Authority is keeping an eye on this issue.

The era of Deep Tech

"With all due respect to the war, Israeli high-tech is part of the global economy and we need to make sure we're not focused only on the war and neglecting important occurrences in the global high-tech sector," insists Bin, adding that, "in fact, very dramatic changes are now taking place in the global high-tech arena." One of the most important developments, he explains, is that there is a wave of innovation that requires deep technological breakthroughs, as opposed to the digital technologies that were dominant until now, especially in such fields as cyber, ICT, FinTech, gaming and others.

"The world is now entering a new phase where solutions are required in the concrete world, in areas such as semiconductor chips, artificial intelligence, energy, quantum computing, and also human health, food, agriculture, and climate. These fields, known as Deep Tech, all present challenges that can't be addressed through digital technologies. They usually entail scientific breakthroughs, rather than coding software," says the Israel Innovation Authority's CEO.

According to Bin, governments around the world now invest large amounts of money in Deep Tech fields such as AI, quantum computing, synthetic biology, and energy. "Until 5-6 years ago, technological innovations mostly took place within the private sector—involving entrepreneurs, investors and privately-owned companies. Today, countries view technology as being important to their national security, not just to their economy. This changes the whole global high-tech scene," he elucidates. Like other countries, the State of Israel, through the Israel Innovation Authority, now invests heavily in early-stage Deep Tech companies.

In October 2025, the Israel Innovation Authority published the first Israeli Deep Tech Report, which analyzed the local scene as well as compared it to other hubs around the world. The report determined that there are more than 1,500 Israeli Deep Tech companies, which together raised approximately one-third of the total annual funds raised by Israeli startups.

Remarkably, Israel is the country with the second highest level of investments in Deep Tech, after the U.S. Comparing Israel to other Western Hemisphere tech hubs with similar population sizes, Israel is in 5th place after the Silicon Valley, Boston, Los Angeles and New York in terms of total VC investments in Deep Tech. This is clearly an extraordinary achievement!

Bin views Deep Tech as the focal point of Israeli high-tech in the years ahead. As such, the Israel Innovation Authority prioritizes supporting these industries. Its entire Start-Up Fund is dedicated to investing in early-stage Deep Tech companies. Moreover, in 2025 it introduced the YOZMA Fund of Funds that invested in nine Israeli Deep Tech funds, which together raised more than $1 billion for investing in Israeli Deep Tech companies. The Israel Innovation Authority invested up to $10 million in each fund.

"In addition, every year the Israel Innovation Authority establishes Deep Tech venture studios for startups; and we support Angels Clubs for Deep Tech, among other initiatives. The goal is to ensure that Israel will be a strong global hub for Deep Tech industries," Bin affirms.

AI, quantum and bio-convergence

Dror Bin lists three major technological revolutions that are in the process of dramatically changing the world: Artificial Intelligence, Quantum Computing, and Bio-Convergence. Together with the Israel Council for Higher Education and the Directorate of Defense Research and Development, the Israel Innovation Authority supports nation-wide initiatives in each of these three fields, each of which is being funded at more than NIS 1 billion. "These are three areas that will produce substantial technological breakthroughs in the next ten years, and Israel must be in a leadership position in these fields," says Bin.

The Israel Innovation Authority also supports these fields by investing in national R&D infrastructure, such as research laboratories in academia and industry, human capital development and even in enabling discounted access to a super-computer's GPUs to enable future developments.

Artificial intelligence is already deeply entrenched in Israeli high-tech—with more than 2,000 Israeli companies incorporating AI in their offerings. A recent study showed that over 90% of employees in Israel's high-tech companies use AI on a daily basis. Indeed, according to the Observer Global AI Index, in 2025 Israel was ranked in 3rd place in the global AI index adjusted for population size, and in 7th place overall (regardless of population size). Israel excels in its human capital's use of AI, in the development of AI products, and in the commercialization of AI developments from academia to industry.

Although Quantum Computing is still in its infancy and its full impact won't be felt for several years, Bin is confident that Israel is capable of being a global leader in this field—which is why the Israel Innovation Authority is already committed to supporting research and startups driving this technology. Bio-Convergence is a quieter revolution, yet it is just as dramatic as the AI revolution, and it is already happening. Bio-Convergence combines Life Sciences with AI and Engineering—areas where Israel is especially strong. Today, humanity has the ability to change life's building blocks: living organisms can be modified and new ones can be created. Breakthroughs in synthetic biology make it possible to do things that sound imaginary.

Israel is home to exceptionally talented life sciences researchers, and Bin believes that, with sufficient support, the country can stand at the forefront of the global Bio-Convergence revolution. "There are almost 200 startup companies in Israel focusing on research that combines biology with engineering and AI. We believe that Israel can be a global leader in this area," Dror Bin concludes optimistically.

For more information, visit innovationisrael.org.il

partnered with the Israel Innovation Authority