Israeli Defense Tech Raises Nearly $850 Million in First Half of 2026 Amid Overall Startup Funding Surge

Israeli high-tech startups raised a total of $7.6 billion in the first half of 2026, marking a 52% increase compared to the same period last year and reaching levels unseen since the 2021 pandemic boom. This data comes from preliminary findings by Lumitech and IVC for the first half of 2026. Despite the overall funding surge, the number of funding rounds in the second quarter of 2026 dropped to a three-year low, indicating that larger sums are concentrated among fewer companies.

The defense and combat technology sector, known as defense-tech, showed the sharpest growth, raising $846 million in the first half of 2026, almost matching the entire amount raised in 2025. This increase is attributed to rising global demand for security technologies, accelerated by Russia's invasion of Ukraine in 2022 and further intensified by the ongoing conflict in Israel. However, the category combines defense, space, and quantum computing companies.

A continuing trend in Israeli high-tech is the concentration of capital among fewer firms. Since 2023, the average number of funding rounds per quarter has declined to about 105 from approximately 140 in 2019-2020, with the second quarter of 2026 dropping to just 86 rounds, the lowest since late 2023. Early-stage startups have been particularly affected, with early-stage funding dropping sharply to $719 million in Q2 2026, down from over $1 billion in previous quarters. Conversely, late-stage funding hit a peak of $2.05 billion, the highest since 2022.

Another challenge for young startups is the depreciation of the US dollar against the shekel. Although startups raise capital in dollars, they pay salaries in shekels, which has significantly eroded their capital. The Growth Companies Forum reported that the cost of employing a developer in Israel rose by 17%-22% compared to the US over the past year, making it 8% more expensive to hire developers in Israel than in America. Lumitech CEO Mia Eisen-Tzafrir noted that entrepreneurs are closely managing their finances to reduce uncertainty caused by currency fluctuations.