Israel Launches State-Backed Funds to Boost Defense Tech Sector

Israel's Ministry of Defense, through its research and development administration (MAPAT) and in cooperation with the Ministry of Finance's Accountant General, is establishing state-guaranteed venture capital funds focused on the defense technology sector. This initiative aims to address a critical need for capital in high-risk, production-intensive defense areas, ensuring Israel's technological and industrial independence and operational continuity, especially in light of recent conflicts and geopolitical shifts.

A competitive tender process selected two firms: Adir Capital, part of Idan Financial Instruments, and Selling Capital, part of Giza. These funds will operate independently, making strategic investments to strengthen critical supply chains, drive economic growth, and create new jobs.

Adir Capital, led by former IDF Technology and Logistics head Maj. Gen. (res.) Micha Yanco and supported by a team from the defense establishment and capital markets, plans to raise over 500 million shekels from its general partners. The fund will focus on Israeli defense tech companies that have proven technology and market presence, aiming for accelerated growth. Approximately 80% of its capital will target growth-stage companies (Series B/C), with the remaining 20% for earlier-stage investments (Series A).

The collaboration with MAPAT and the Ministry of Finance provides the funds with insight into the defense establishment's procurement needs and support for international expansion. The state's involvement, primarily through government guarantees, is designed to mitigate risks and leverage private capital for national objectives, thereby fostering local entrepreneurship and ensuring responses to security and economic challenges.

Both funds are expected to complete investor fundraising in the coming months and will commence actual investments following their initial closing. The Ministry of Finance's involvement underscores the government's strategy to bolster the economy and national security through targeted financial tools.