Despite War and Tension, Israeli High-Tech Had a Great Year

(Shutterstock) (Shutterstock)

Even in the face of intense regional and geopolitical conflict, Israel’s tech sector demonstrated extraordinary growth in 2024.

By Zachy Hennessey, Israel 21c

Israel’s high-tech sector has proven its resilience and adaptability in 2024, achieving significant growth despite significant regional challenges, according to the 2024 annual report from Startup Nation Central (SNC).

The tech ecosystem not only weathered the storm but emerged stronger, with notable increases in funding, successful exits and continued global leadership in key sectors.

“Despite ongoing war and geopolitical tensions, the tech ecosystem achieved remarkable milestones — unexpected funding levels, high-value M&A deals, and stellar performance by public companies,” notes SNC CEO Avi Hasson.

“This resilience stems from Israel’s relentless drive for innovation, bolstered by the growing maturity and sophistication of the ecosystem.”

Record-setting acquisitions

SNC reports that Israeli tech companies raised $12 billion in 2024, representing a 27% increase from the previous year.

This growth is particularly noteworthy as it outpaced both European and Asian markets, keeping pace with US venture capital trends.

The sector’s contribution to the national economy remained substantial as usual, with high-tech GDP growing by 2.2% in the first three quarters of 2024, even as the overall economy contracted by 1.5%.

2024 also marked a significant shift in Israel’s tech landscape, as the ecosystem evolved from its traditional startup-focused model to become more scale-up oriented.

In other words, the baby companies that the high-tech stork has been delivering over the past few years have been maturing and growing.

This transformation was evidenced by 15 “mega-rounds” — funding rounds totaling $100 million or more — which altogether reached $4 billion. That funding accounted for 41% of total funding, a sharp increase from 2023’s nine rounds and $2 billion.

Another indicator of scaling was the record-setting number of startups getting bought by larger companies. Israeli companies increasingly were the acquirers. Multinational corporations also increased their M&A activity in Israel.

In terms of market performance, an index of the top 70 Israeli tech companies traded on NASDAQ rose by 15.8%, outperforming the NASDAQ 100 equal-weight index’s 9.4% gain.

Cybersecurity dominance continues

Israel has always excelled in cybersecurity, and 2024 was no different in that regard.

In the second quarter of 2024, we reported on the maturation of Israel’s cybersecurity industry. That trend continued through the year: Israel maintained its position as a global cybersecurity leader, with private funding in the sector matching over 40% of US cybersecurity investment.

According to SNC, half of the world’s top 10 cybersecurity companies were founded by Israelis, and seven maintain R&D centers in Israel.

The median funding round in cybersecurity significantly exceeded the average across other tech sectors, demonstrating strong investor confidence in Israeli security innovations.

Still plenty of hill to climb

All in all, it’s been a massively successful year for high-tech, especially considering that hundreds of reserve soldiers called to participate in the war effort had to do so at the expense of leaving the tech industry short-handed.

On the other hand, there was a hefty push to support the high-tech industry as it adapted to the realities brought on by the war in Gaza. A significant number of special funds were raised and granted by both governmental and corporate actors, which certainly played a role in ensuring that the high-tech sector would thrive during this period.

“This year reinforced a vital truth: Global investment and technology trends often outweigh local challenges,” notes Hasson.

“But maintaining this edge demands proactive policies, strategic investments and a focus on new growth engines.”

The report notes that despite its successes in 2024, the ecosystem faces several challenges that require attention.

The decline in new startup formation and fewer investment rounds at the early stage could impact future innovation pipelines. Additionally, judicial and economic uncertainty, coupled with regional instability, poses risks to Israel’s competitiveness as a global tech hub.

Still, industry experts remain cautiously optimistic. They expect to see continued growth in private funding, with artificial intelligence emerging as a cornerstone of venture strategy.

Cybersecurity investments are projected to remain strong, and the M&A market is anticipated to maintain its momentum, with the possibility of a reopened IPO market providing additional exit opportunities.

The SNC report emphasizes the crucial role of government support in maintaining Israel’s competitive edge. Key recommendations include establishing clear, consistent policies to minimize political and economic uncertainty, strengthening educational and research infrastructure and implementing targeted incentives for investors and multinational corporations.

“The story of 2024 is one of resilience, adaptation and ambition,” says Hasson. “By tackling challenges head-on, Israeli tech will continue to set benchmarks for global innovation.”