Israeli High-Tech Recovery Masks Underlying Weaknesses, Report Finds
Translated & summarized from Maariv by baba
A new report from Reichman University indicates that Israel's high-tech sector's recovery is driven by large investments rather than broad growth, with a declining percentage of employees working in Israel. The average funding round hit a record $39.3 million in early 2026, but the number of deals remains low. The report warns that this trend could limit the emergence of future industry leaders and emphasizes the need for job creation within Israel.
The story in 5 lines · by baba
- Israeli high-tech's recovery is driven by large investments, not broad growth, a Reichman University report found.
- The percentage of high-tech employees working in Israel fell from 69% in 2019 to 62% in 2026.
- Average funding rounds reached a record $39.3 million in the first half of 2026.
- Venture capital is increasingly focusing on follow-on investments in existing companies.
- The report warns of a shrinking base for future industry growth and job creation in Israel.
A new report from Reichman University's Phoenix Institute for Capital Market Research reveals that while Israeli high-tech is attracting significant investment, the nature of its recovery is shifting, with potential long-term implications.
Although capital raising continues to be strong, with average funding rounds reaching a record $39.3 million in the first half of 2026, the number of deals has remained lower than peak years. This suggests the recovery is driven by larger deals rather than a broad increase in activity. Furthermore, venture capital funds are increasingly focusing on existing portfolio companies, with approximately 65% of investment deals being follow-on rounds and only 35.5% being initial investments.
The report highlights a concerning trend in employment, with the percentage of workers in Israel within private Israeli high-tech companies dropping from about 69% in 2019 to 62% in 2026. This decline is evident not only in support, operations, and sales roles but also in research and development, indicating that a larger portion of the core technological work is now being conducted abroad.
"Israeli high-tech continues to demonstrate strength and attract significant investments, but the recovery is not as broad as it appears," summarized report author Kadmi. He noted that more capital is concentrating in fewer companies, a growing share of activity is happening outside Israel, and employment is not returning to its previous growth trajectory.
The primary concern is that this concentration could lead to a smaller base of companies from which the next generation of the industry will emerge. The challenge, according to the report, is to ensure that the success of large companies translates into the growth of new firms, job creation within Israel, and a strengthened connection between the high-tech industry and the local capital market.
