How Israel’s Tech Industry Thrived in 2024 Amid a Year of Conflict

This growth was fueled by larger funding rounds, a record $15.8 billion in mergers and acquisitions (M&A), and an increasing number of mature companies driving innovation and global integration.

By Pesach Benson, TPS

Despite a year of war, Israel’s tech sector surpassed $12 billion in private funding in 2024, according to a report released on Tuesday.

Explaining the report’s findings, Avi Hasson, CEO of Startup Nation Central (SNC), which released the report, told The Press Service of Israel, “Israel’s tech ecosystem is shifting from a ‘Startup Nation’ to a ‘Scale-Up Powerhouse.”

SNC is a Tel Aviv-based non-profit that promotes Israeli startups and innovation.

“Until now, Israel’s tech ecosystem has achieved success through its ability to move swiftly, adapt and remain resilient. Currently, we are seeing this ecosystem mature. Scale-ups have transitioned from being acquisition targets to active acquirers, driving an ecosystem that creates sustained growth and value,” Hasson explained to TPS-IL.

“Multinational corporations play a pivotal role in supporting this shift, accounting for $10.7 billion in M&A transactions and driving 58% of all acquisition events, the highest share in a decade. Global investors, making up 66% of active participants, continue to find compelling opportunities in Israeli innovation.”

Among the report’s key findings was a significant rise in private funding, which totaled $12.2 billion, a 31% increase from the previous year’s adjusted figure.

This growth outpaced global trends, particularly in Europe and Asia, where investment rounds declined.

Israeli companies secured $10.6 billion in reported funding, with the remainder attributed to yet-to-be-disclosed rounds.

Scale-ups played a pivotal role, with 15 mega-rounds collectively raising $4 billion, underscoring the ecosystem’s ability to attract substantial global investment.

Notably, the tech sector’s contribution to the economy remained robust, with high-tech GDP growing by 2.2%, even as the broader economy contracted by 1.5%.

This growth was fueled by larger funding rounds, a record $15.8 billion in mergers and acquisitions (M&A), and an increasing number of mature companies driving innovation and global integration.

Cybersecurity maintained its dominance as a leading sector, securing $3.8 billion—36% of total funding—with a 90% increase in investment compared to 2023.

This sector’s median funding rounds reached $18 million, highlighting its critical role in the global tech landscape.

Additionally, acquisition-driven exits reached an all-time high, with total deal values of $15.8 billion across 104 transactions, a 49% increase in value and a 25% rise in volume compared to the previous year.

“Cybersecurity remains a cornerstone of Israel’s tech leadership, cornering over 40% of U.S. cybersecurity funding and with seven of the top 10 global cybersecurity companies maintaining Israeli R&D centers,” Hasson told TPS-IL.

“Defense tech is also positioned for strong growth this year, driven by rising global demand and increased investment in battle-tested, dual-use technologies that bridge defense and commercial sectors. In 2024, newly established defense startups doubled, with funding trends showing continued momentum. AI will play a transformative role, with significant investments expected in infrastructure like data centers and vertical applications across industries,” he added.

Despite these successes, the report identifies challenges that could hinder sustained growth.

The global trend of fewer newly founded startups has impacted Israel’s innovation pipeline, while judicial and economic uncertainties pose risks to investor confidence.

The narrowing diversity of innovation sectors, driven by reduced funding for emerging fields, further underscores the need for targeted government interventions.

“While scale-ups have become the backbone of Israel’s tech ecosystem, early-stage innovation is essential for long-term growth. Balanced grants and incentives could help address the decline in new startups and ensure a steady flow of groundbreaking technologies,” noted Yariv Lotan, VP of Digital Products and Data at Startup Nation Central.

Hasson told TPS-IL, “While the growing maturity of our ecosystem is encouraging, the drop in early-stage activity is a significant concern. The number of private funding rounds declined by 4% in 2024, falling to 766, part of a multi-year trend. While early-stage rounds made up 80% of deal volume, they represented only 29% of total funding, highlighting a shift away from smaller, riskier bets.”

He added, “Fewer startups in the ecosystem limits the diversity of innovation and threatens the long-term health of the pipeline.”

Looking ahead, the report emphasizes the critical role of government policy in maintaining Israel’s competitive edge.

Investments in education, academic research, and innovation infrastructure are deemed essential for cultivating the talent and technologies needed to remain at the forefront of global innovation.

Strategic focus on emerging fields like artificial intelligence (AI) and quantum technologies is also highlighted as a priority.

Hasson called for “targeted government policies” to support early-stage investors, such as incentives for academic R&D, and mechanisms to nurture emerging technologies.

“Ensuring a steady flow of new ideas and startups is essential for maintaining Israel’s leadership in global innovation,” he told TPS-IL.

The report forecasts increased private funding and sustained impact from scale-ups.

Artificial intelligence is poised to become a cornerstone of venture strategy, with significant investments anticipated in AI infrastructure.

Cybersecurity is expected to remain a top investment priority, delivering substantial exits through acquisitions and IPOs.

Additionally, the M&A market is projected to stay strong, with the possibility of a resurgence in IPO activity providing new opportunities for exits.

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