Israel’s Long-Overdue Gift to Startups

State guarantees open doors for young dreamers, fueling defense innovation and the spirit of renewal

There are moments when you read a headline and think: finally. That is exactly how I felt when I saw Prime Minister Netanyahu’s announcement that Israel will, at long last, back venture capital funds for defense technology startups with state guarantees.

For me, this is not just another economic policy or a routine announcement buried in the finance pages. This is history catching up with itself. A long-overdue recognition that Israel’s startup ecosystem, especially the brilliant but underfunded defense-tech entrepreneurs, cannot survive on ingenuity alone.

I welcome this with open arms.

The fact is that Israel has thrived for decades because it made a conscious choice to invest in R&D, to build an ecosystem where necessity breeds invention, and where defense challenges spur some of the most extraordinary innovations the world has ever seen. But somewhere along the way, Israel forgot to support the very chickens laying the golden eggs.

For years, small and medium-size defense-tech startups were shut out of the system, overshadowed by giants like Rafael, Elbit, and IAI. Venture capitalists kept their distance from defense innovation – it was “too risky,” “too regulated,” “too political.” And yet, the battlefield was changing faster than ever. Hamas’s drone swarms, Hezbollah’s rocket arsenals, Iran’s ballistic missiles – none of these wait politely while entrepreneurs chase seed funding.

So yes, the scheme is late. But is it too late? Absolutely not. Better late than never.

Here is what is on the table: NIS 200 million (about $60 million) in state-backed guarantees, designed to attract private investors into new venture capital funds focused squarely on defense innovation. The guarantees do not fund startups directly. Instead, they reduce investor risk, making it far more attractive to bet on those high-risk, high-reward ideas that might just change the face of modern warfare.

The goal is to raise at least NIS 1 billion per fund, bringing in both local and international capital. For the first time, young innovators building AI-driven defense systems, drone interception platforms, or next-generation battlefield communications might actually have access to serious funding, and not just at the mercy of ad-hoc procurement deals.

Put another way: a state-guarantee safety net that encourages risk-taking in precisely the areas where Israel must never fall behind. This is how you build resilience and renewal into an innovation ecosystem.

Of course, this move does not happen in a vacuum. Europe is canceling arms deals. Spain just reneged on a $325 million Rafael missile purchase. Canada and the UK have suspended export licenses. France has made it harder for Israeli companies to exhibit at defense expos. The message is clear: political winds can shift, leaving Israel vulnerable.

As Prime Minister Netanyahu put it, “The ongoing war limits our ability to import weapons and weapons parts, and threatens us with economic setbacks. We will have to invest in our ability to develop defense and weapons industries here.”

Prime Minister Netanyahu is right, of course. And if you ask me, this is not just about independence; it is about survival. When allies waffle, Israel must stand taller on its own two feet.

What excites me most is not the size of the guarantee – let’s face it, NIS 200 million is hardly a fortune in the grand scheme of defense budgets. What excites me is the signal. The clear acknowledgment that small, hungry, innovative startups deserve a chance to compete in the defense ecosystem.

Reservists who return from the battlefield with ideas scribbled on the back of a notebook. Engineers who tinker with drone counter-systems in garages. Teams that dream up wearable detection devices like SkyHoop, born from real battlefield experience. These are the innovators who might never get a seat at the table without a mechanism like this.

And history tells us that the small and scrappy players often change the world. Israel’s cyber industry started that way. So did Iron Dome.

You have heard me argue before that Israel’s long-term security cannot rely on AI buzz alone. It must invest in Deep Tech – in energy systems, materials science, space, semiconductors, and biotechnology. That is where enduring security superiority will come from.

This state-guarantee scheme, if done right, can be a bridge. Because defense tech startups often sit at the cutting edge of Deep Tech. An AI algorithm developed for drone interception might evolve into a logistics tool. A new radar material could have biomedical applications. History shows us that dual-use technologies spill into the civilian economy, driving prosperity and strengthening society far beyond the battlefield.

This is not just about weapons. It is about innovating the future of Israel.

Let us not kid ourselves. Implementation would not be easy. Startups still face bottlenecks in regulation, export controls, and procurement bureaucracy. And raising NIS 1 billion per fund is ambitious, even with guarantees. Investors will still want clarity, transparency, and proof that the system would not be bogged down by red tape.

But the alternative, doing nothing, is far worse. Without bold moves like this, Israel risks becoming dependent on foreign supply chains precisely when those chains are snapping.

Here is the vision I see: A defense-tech ecosystem that mirrors Israeli cyber revolution. Dozens of new startups backed by serious capital, collaborating with the IDF, solving battlefield problems in real time, and spinning out technologies that strengthen both the military and civilian sectors. An ecosystem that creates jobs, builds factories, anchors supply chains in Israel, and tells the world that when others isolate Israelis, they answer with creativity.

It is the ultimate act of resilience and renewal.

I said at the start that this move is long overdue. But perhaps the delay has made it even more urgent, even more necessary. In a strange way, the timing may be perfect. The challenges Israel faces – from Gaza to Tehran to European sanctions – demand boldness, not hesitation.

So yes, I welcome this initiative wholeheartedly. Not because it is flawless, but because it is necessary. Not because it solves everything, but because it starts something.

And in Israel, starting something is often the most powerful act of all.