Inside Israel's Defense-Tech Breakout: $1 Billion in 2025, More Than All Previous Years Combined
Per Globes citing senior MAFAT officials, Israeli defense startups raised more than $1 billion in 2025 — surpassing all previous years combined. In 2024, the same sector raised about $150 million; total cumulative funding before 2025 was approximately $422 million.
The acceleration was not gradual. It was a step-change driven by combat experience, doctrinal shift, and a Defense Ministry strategy that for the first time directly funds startups rather than routing all R&D through the three legacy primes.
What changed
The Defense Ministry's Innofense program — launched in 2019 to identify civilian companies whose products had battlefield applications — proved useful before October 7. After Hamas's October 7, 2023, attack, it became essential. More than 130 Israeli startups have since been integrated into the war effort.
The MAFAT framing shifted. "Until two years ago, there was no term for 'defense tech.' The two years of war have benefited startups, due to the conflicts on the battlefield," Col. Yishai Kohn of MAFAT's Planning, Economics & IT Department told Globes.
The first unicorn
Heven AeroTech, a hydrogen-powered drone manufacturer founded in 2019 by Bentzion Levinson, reached a $1 billion valuation in a $100 million round led by IonQ. IonQ also signed a cooperation agreement with Heven to integrate quantum-based sensing, communication, navigation, and security into the company's drone systems.
Heven's tactical Raider drone carries up to 23 kilograms and flies for up to 12 hours — a payload-and-endurance profile that places it alongside larger US tactical drones, at materially lower production scale and cost structure than legacy defense platforms.
The pattern across the category
Representative 2025 transactions:
- Heven AeroTech — $100M @ $1B (IonQ-led)
- Kela — $100M, founded 2024; investors include Sequoia, Lux Capital, IQT
- Sentrycs — acquired by Ondas Holdings for $225M
- UVision — acquired SpearUAV; together with US partner Mistral, signed a $982 million deal to supply suicide drones to the US Army
- Line5 — founded 2025 by Yiftach Shoolman (Redis founder), backed by NFX
- XTEND — pursuing a Nasdaq IPO at a reported $1.5 billion valuation
The MAFAT shift
Three strategic moves are redefining how Israeli defense R&D capital flows.
First — direct startup funding. Per Col. Kohn, MAFAT director Brig. Gen. Dr. Danny Gold has determined that at least 10% of the Ministry of Defense's R&D budget in 2026 will go to startups, not to the three large defense companies, "which are already flourishing due to increased demand from abroad."
Second — state-guaranteed investment funds. The Ministry of Defense and Ministry of Finance jointly established two state-guaranteed investment funds totaling NIS 200 million.
Third — non-equity supply orders. When MAFAT works with a startup, it does not take equity. The structure relies on large supply orders that companies can present to investors as forward revenue commitments.
Export, not just procurement
Per Globes citing MAFAT, in the first half of 2025, 12 Israeli startups signed government-to-government export agreements — a record level disclosed for the sector. Combat validation is the catalyst.
NATO is engaged. "We have much to learn from Israel," Dame Fiona Murray, chair of the NATO Innovation Fund, said at the second annual DefenseTech Summit at Tel Aviv University in December 2025.
The investor side
A new venture infrastructure is forming around the category. Protego Ventures, founded by Lital Leshem (former IDF / Carbyne co-founder) and Lee Moser (former chief of staff to Israel's ambassador to the US), backs early- and growth-stage defense startups. Aurelius Capital — anchored by former MoD director general and Air Force chief Maj. Gen. (ret.) Amir Eshel — operates at later stages. International capital flows in alongside: a16z's American Dynamism fund has been the most active defense-tech investor globally with 18 deals across 2022–2025.
Source data: MAFAT, Israel Ministry of Defense, SIPRI, Crunchbase, Dealroom, Globes, Calcalist, Times of Israel, Reuters, company announcements.
