Israeli Defense Ministry Doubles Startup Orders to Nearly $260 Million in First Half of 2026
In the first half of 2026, the Israeli Ministry of Defense significantly increased its orders to defense startups, doubling the volume to 960 million shekels (approximately $260 million). According to a report from the Ministry's Directorate for Defense Research and Development (Maf'at), 37 new companies received orders, while 15 companies ceased receiving orders after two years of inactivity. This surge reflects the ministry's strategic push under Director Amir Baram to strengthen Israel's technological independence and expand international defense collaborations.
The defense tech sector in Israel continues to grow robustly, following a record $19.2 billion in defense exports in 2025. The first half of 2026 also saw record fundraising and mergers and acquisitions exceeding $2.5 billion, including unicorn startups. Maf'at actively manages contracts with 322 companies, with 246 direct and 76 indirect engagements. Notably, 33 companies grew to "medium-sized" status, defined as having over 100 employees and revenue growth or acquisition by a larger firm, receiving 331 million shekels in orders.
Small companies are increasingly contributing to defense exports, with 15 startups securing 176 million shekels in foreign orders, mainly from the U.S. and its Congressional Defense Innovation Unit (CD&I), which recently approved a $750 million budget for 2027 focused on missile defense, counter-drone systems, tunnel technologies, and emerging security tech.
Order distribution by startup stage shows 55.9% of orders went to Series B companies, 37.6% to pre-seed and seed stages, and 6.5% to Series A. The leading technology areas receiving orders were autonomous platforms (28.9%), artificial intelligence and digital tech (23.8%), cyber (16.5%), sensors (8.4%), communications (5.4%), and navigation (4.3%). Geographically, 63.7% of companies are based in central Israel.
Maf'at's flagship accelerator, Inofens, completed five cycles with 72 companies, achieving a 66% success rate in proof of concept. Another accelerator, run with SOSA and iHLS, launched its sixth cycle in late 2025 with 19 companies focused on cyber, AI, sensors, and other fields. Among graduates, 25 companies received follow-on orders totaling about 66 million shekels.
The ministry also fosters international cooperation, notably with Germany and India. Germany ranks as Israel's second-largest defense export market (21%), with joint participation in Berlin's DTM exhibition and challenges from Deutsche Telekom. India, Israel's top defense export destination (29%), collaborates on the "Drishti" program launched in December 2024, focusing on AI, defense tech, and drones.
Looking ahead, Maf'at expects continued growth in 2027, aiming for increased fundraising and operational impact, especially in counter-drone technologies. While progress in munitions and missile platforms remains limited, the ministry anticipates that enhanced investment and involvement will translate into battlefield-ready innovations and expanded exports.
