Israeli Defense Tech Sector 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 not seen since the 2021 pandemic boom. This data comes from preliminary findings by Lumitech and IVC for the first half of 2026. However, despite the overall growth, the number of funding rounds in the second quarter of 2026 dropped to the lowest in three years, indicating that larger sums are being concentrated among fewer companies.

The defense and combat technologies sector, known as defense-tech, showed the sharpest growth, raising $846 million in the first half of 2026, almost matching the total raised in all of 2025. This surge is attributed to increased global demand for security technologies following Russia's invasion of Ukraine in 2022 and further intensified by the ongoing conflict in Israel. The data groups defense, space, and quantum computing companies under one category.

A continuing trend in Israeli high-tech is the concentration of capital in a shrinking number of companies. Since 2023, the average number of funding rounds per quarter has been about 105, down from around 140 in 2019-2020. In Q2 2026, this number fell to 86, the lowest since late 2023 when the October 7 war broke out. Early-stage startups have been particularly affected, with early-stage funding dropping sharply to $719 million in Q2 2026, compared to over $1 billion in previous quarters. Conversely, later-stage companies hit a record high with $2.05 billion raised, the highest since 2022.

Another challenge for young startups is the depreciation of the US dollar against the shekel. Since these companies raise capital in dollars but pay salaries in shekels, the dollar's decline has significantly eroded their funding. 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 currently 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.