Israeli defense start-ups smash record with $1b. in 2025 funding

The amount is more than all other years combined, says a senior defense official.

By Batya Jerenberg, World Israel News

Smashing the previous record, Israeli defense start-ups pulled in $1 billion in funding, mergers and acquisitions in 2025, Globes reported Tuesday.

“The funding in 2025 has been greater than all previous years combined, and the year is not over yet,” a senior defense official told the financial paper, with last year’s high of approximately $150 million seeming a pittance in comparison.

Israeli defense companies cannot survive solely on the local market, as the IDF is the only potential customer in the country.

The two-year war in Gaza, which proved the worth of their technology under battle conditions, and a global jump in defense spending, due largely to European fears of Russian intentions since its 2022 invasion of Ukraine, have seemingly driven the surge this year.

According to the report, since the Hamas-led invasion and massacre of Oct. 7, 2023, more than 130 Israeli startups have started working with the Ministry of Defense Directorate for R&D (DDRD) to integrate their products into the IDF war machine.

These include drones, sensors, communications equipment, navigation aids, electronic warfare technology and robotics, for both attack and defense purposes.

Some 40% of the acquisitions were made by one American company, Ondas Holdings.

Ondas has purchased several Israeli companies, including counter-drone systems manufacturer Sentrycs, for $225 million. Sentrycs’ products are also used by the IDF.

In terms of attracting funding, Heven Aerotech, which patented the next generation of drones, those powered by silent hydrogen fuel cells, raised $100 million this year.

Heven is Israel’s first unicorn in the defense field – a company valued at $1 billion or more.

It was outpaced only by the $110 million obtained by Classiq, whose software provides quantum computing solutions that can be used in industries ranging from aerospace and defense to healthcare and finance.

The DDRD helps the start-ups in several ways besides assisting with research and development, Col. Yishai Kohn, head of DDRD’s Planning, Economics & IT Department told Globes.

It can have the army test some of their products, although not all.

“Capacity is limited,” Kohn explained, giving as an example that “it is impossible to take on 200 drone companies…. In the counter-drone field, we run field trials and place them on the border. The limitations are not only in money, but also in the operational scope that is possible.”

The ministry can also attest to potential buyers or investors that the IDF has bought a company’s products, which “provides credibility,” he said.

Considering that the “big three” in Israeli defense – Elbit, IAI and Rafael – each have hundreds of millions of dollars in backlogged orders, “it is right,” Kohn said, “to continue to promote the [start-up] ecosystem.”