Israel allocates $60 million to boost defense tech startups amid global boycott pressures

Israel has decided to designate NIS 200 million ($60 million) to strengthen support for technological innovation. The allocated amount will serve as state-backed guarantees for new defense-oriented startups in need of financial infusion during the critical launch phase. The overall purpose of the initiative is to strengthen Israel’s security independence amid growing international political calls to boycott Israel. In addition, the earmarked funds are also meant to enhance Israel’s technological superiority on the battlefield. 

“For the first time, we are launching a tender to establish state-guaranteed funds for [defense] innovation,” Accountant General Yali Rothenberg said. 

“The funds will encourage investment in advanced technologies in the defense sector, companies that establish manufacturing activity in Israel, with a focus on companies with growth potential, while bringing competition to the Israeli defense market,” he added.

Israeli Prime Minister Benjamin Netanyahu announced on Monday that the current Gaza war “limits our ability to import weapons and weapons parts, and threatens us with economic setbacks. It’s very difficult to influence that… at least in the coming years we will have to deal with these isolation attempts.”

Netanyahu, therefore, said that the Jewish state will have to "adapt to an economy that in certain areas, has autarkic (self-sufficient) characteristics." He later clarified that he was not referring to total isolation, but that “the world is dividing into blocs, and we are in none of them.” The prime minister also stressed that Israel benefits from “a scientific and technological edge that creates dependency and interest in cooperating with us.”

The initiative is also designed to address the current shortage of funds for the volatile defense industry and the realization amid war that Israel’s long-term security depends on continued military innovation and a technological edge. 

“We are in the midst of a security and economic campaign that requires not only a firm stand in the present but also investment in the future,” Defense Minister Israel Katz explained. 

“The establishment of venture capital funds in the field of advanced security technologies is a strategic move aimed at strengthening the security and technological independence of Israel, ensuring superiority on the battlefield in the years to come, and creating a solid economic base that relies on Israeli innovation and creativity,” he added.

The Israeli defense sector has for many years been dominated by large companies such as Israel Aerospace Industries (IAI), Elbit Systems and Rafael Advanced Defense Systems. However, the complex multifront war and international boycott calls have stimulated the rise of smaller Israeli defense-oriented startups that seek to enhance the country’s overall security capabilities. However, such development requires financial support for the startup scene. Israel is reportedly already home to over 300 defense startups, according to data from Startup Nation Central, an organization that is dedicated to supporting and strengthening the Israeli tech industry. 

“Defense tech can and should become the next technological locomotive of Israeli high-tech,” Defense Ministry Director General Maj. Gen. (res.) Amir Baram assessed. “It is based on the unique ecosystem built here, which connects high-tech warriors, proven operational experience, constant operational friction, and an Israeli culture of rapid development while taking risks and drawing lessons quick."

Brig.-Gen. (res.) Dr. Daniel Gold, head of the DDR&D (Directorate of Defense Research & Development), noted that during the war, “we adopted technologies from over a hundred startups directly for the IDF, and we saw how essential this innovation is to the country’s security and how it provides the IDF with a tremendous advantage on the battlefield.” 

“We are now working to expand this engine: to encourage private investments in defense technology, to expand the industrial base and local production infrastructure, and to attract quality personnel to the field,” he concluded.