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Jacob Wolinsky
Hedge fund expert

5 Trends That Will Help Reshape And Rebuild Israel’s Tech Industry

The ongoing conflict, coupled with widespread geopolitical tension in the region, had nearly pushed the Israeli tech sector to the brink of collapse in 2024.

For months, thousands of tech workers have been absent, as many have continued to participate in active reserve duty or caring for family. Others have jumped ship, outright leaving the tech industry, and seeking employment in other fields or sectors instead.

The prolonged war has shattered the doors of some small-to-medium-sized tech startups, as a sharp decline in investment and support from foreign venture capitalists have driven them to merge with larger corporations or cease their operations indefinitely.

Yet, despite all this adversity, 2024 seemed to deliver somewhat promising results for the resilient tech industry as the war now drags into its second year. While the sector faces broader uncertainty, which experts suggest could impact the broader economy in the near term, insights show that the Israeli tech sector has raised over $9 billion since the war began on Oct 7, 2023.

Continued investment during the last several quarters has seen Israeli startups and tech firms placing third behind Silicon Valley and New York, according to the state-funded Israel Innovation Authority (IIA).

2025 promises to be another positive year for the Israeli tech market as the war and ongoing conflict are expected to reach a de-escalation point in the coming months. Furthermore, renewed interest in local tech companies and startups will help revive an industry that continues to remain optimistic about the future of Israel’s tech industry.

Rejuvenation Of Israeli-Based Tech Start-Ups

“Resilience” remains a key objective for the tech industry, and perhaps more importantly for the startup ecosystem. Around a half – 49% – of Israeli tech companies have reported seeing a decline in activity, including canceled investment since the outbreak of the war.

However, 2025 could bring new optimism, with new technologies emerging from the war. These digital advancements could include a handful of exciting new ventures that have been put on hold over the last few years.

We could possibly see the creation of several new startup companies, which some experts have dubbed the “tech startup baby boom”. The assumption is that the country is reaching a de-escalation point, which could help spark renewed interest in Israeli tech startups, followed by the potential of foreign investments, and larger acquisitions.

Next-Gen AI Leaders

Artificial Intelligence (AI) has become a prominent figure in the technology industry, not just in Israel, but around the world. Investments in AI, Gen AI, and Machine Learning (ML) tools have continued to be on the rise.

This year, more than $200 billion is expected to be invested in artificial intelligence, according to Goldman Sachs, an international investment bank and financial leader. Not only this, but around 97% of senior business leaders unanimously agree that investment in AI applications, tools, resources, and software will continue to remain a priority in 2025.

Investors will continue to be focused on identifying, and supporting companies that can deliver competitive digital solutions. Israel is already home to plenty of innovative AI companies and leaders, which could see a wave of new attraction for local talent and innovation.

Continued U.S. Support For Tech-Focused Startups

Another Donald Trump presidency could help to spark more interest in Israel’s tech market. In his previous tenure as president, Trump outlined key policies that reflected issues to prioritize business, innovation, and collaboration.

Should the Trump Administration decide to take a similar approach during his upcoming term, it would likely create a more accessible environment for Israeli and U.S. startups. With reduced regulatory burdens and a strong emphasis on supporting technological innovation, many U.S. tech companies could be turning to Israel as a trusted, and reliable partner in the Middle East.

Not only this, but for Israeli startups, which often target the U.S. market, new developments, and the introduction of key policies would help domestic companies to benefit from this alignment. Positive momentum for the wider U.S. tech industry could deliver favorable outcomes for Israeli companies and set the stage for renewed partnership and trade.

Growth In Acquisitions

In addition to this, there has been a show of confidence in the Israeli tech market with the number of new acquisitions. In total, new merger and acquisition (M&A) deals raised a robust $12.6 billion in 2024, spread across 53 deals, according to one report.

Two mega deals of $1.0 billion each broke the number of record-setting M&A deals in one year. Salesforce acquired Own, a Tel Aviv-based data protection platform in a $1.9 billion deal.

The second-biggest acquisition included Resident, an online furniture and mattress sales company, acquired by Ashley Home, a leading North American home retailer, in a $1.0 billion deal.

Such blockbuster deals could be on the cards for 2025, as foreign companies and investors look towards Israeli innovation to further diversify and scale digital development, and how the nation’s tech industry will help play a key part in the growth of widescale digital developments.

Opening The Tech Market To Foreign Talent

To maintain a competitive advantage, Israeli lawmakers could seek to reduce the red tape to attract highly skilled foreign workers and new tech talent. The ongoing conflict has seen many workers leaving their jobs to take up reserve duties or care for families residing in impacted zones.

Despite the ongoing conflict, there has been a continued demand for high-tech workers, albeit slower compared to before the war.

In July 2024, the Israeli Central Bureau of Statistics (CBS) reported that the number of salaried jobs in high-tech had reached 402,000, which was an increase from 400,000 recorded in May 2024.

For Israel to remain a key player in the global tech race, the local market requires access to highly skilled, knowledgeable, and well-trained professionals to support its rebuilding efforts. Having policies that will welcome foreign talent will secure Israeli tech companies’ position, and ensure that they have access to the necessary human capital to scale.

In 2024, the tech sector faced an unprecedented amount of challenges. Looking ahead, there seems to be renewed optimism across the industry that will help to maintain Israeli tech companies’ competitive advantage on the global stage. 2025 will bring new developments that will help to rebuild and redefine Israel’s tech industry.

About the Author
Jacob Wolinsky is the founder and CEO of Hedge Fund Alpha (formerly ValueWalk Premium), a hedge fund intelligence service. Prior to Hedge Fund Alpha, Jacob started Valuewalk.com, a popular business news site. Prior to that Jacob worked as an equity analyst specializing in mid and small-cap stocks. He lives with his wife and 5 kids in New Jersey.
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