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2025-01-13
The Israeli tech industry has long been a beacon of innovation, but as the global landscape evolves, so too must the strategies that sustain its growth. In a recent interview with CTech, Rotem Eldar, Co-founder and Managing Partner of 10D, shared his insights on the challenges and opportunities facing Israelās high-tech sector. Eldar emphasized the need for government intervention in three key areas: resolving travel disruptions, investing in talent development, and strengthening infrastructure for innovation. His vision is clear: Israel must adapt to maintain its competitive edge in an increasingly complex global market.
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of the 2025 VC Survey Insights
1. 2024 in Review: Despite geopolitical tensions and a global economic slowdown, Israelās tech ecosystem demonstrated resilience. Startups raised significant capital, with five major exits exceeding $1 billion. Cybersecurity, healthcare, and AI sectors saw notable growth, while defensetech emerged as a key area of innovation.
2. Looking Ahead to 2025: The rise of generative AI is reshaping the tech landscape, lowering barriers to entry for software development and challenging traditional SaaS models. Eldar predicts a shift toward deep tech, including semiconductors, robotics, and computational biology, as startups leverage proprietary data to create unique solutions.
3. Government Action Needed: Eldar calls for the Israeli government to address travel disruptions, invest in talent development (particularly in AI, robotics, and computational biology), and bolster infrastructure for innovation. He also advocates for incentivizing local institutional investors to reduce reliance on foreign capital.
4. Emerging Sectors: Generative AI applications in industrial tech, healthcare, and robotics are poised for growth, while traditional SaaS companies may struggle with commoditization.
5. AI Revolution: Israel is not missing out on the AI race but must focus on integrating AI into areas where it already excels, such as defense, robotics, and healthcare.
6. IPO Market: A gradual recovery in the IPO market is expected in 2025, with higher thresholds for profitability and revenue.
7. Investment Trends: Early-stage startups, particularly in emerging sectors, are likely to thrive in 2025, while mature companies may face challenges adapting to market shifts.
8. 10Dās Investments: In 2024, 10D continued its focus on transformative technologies, investing in companies like bananaz, which uses AI to revolutionize design change management in engineering and manufacturing.
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What Undercode Say:
The insights shared by Rotem Eldar in the 2025 VC Survey highlight both the strengths and vulnerabilities of Israelās high-tech ecosystem. As the global tech landscape undergoes seismic shifts driven by generative AI and deep tech, Israelās ability to adapt will determine its future success. Hereās a deeper analysis of the key takeaways:
1. Talent Development as a Strategic Imperative: Eldarās emphasis on investing in talent, particularly in AI, robotics, and computational biology, underscores a critical need. Israelās tech ecosystem thrives on its ability to produce world-class engineers and scientists. However, as global demand for AI expertise grows, Israel must double down on education and training programs to maintain its leadership. This includes fostering partnerships between academia, industry, and government to ensure a steady pipeline of skilled professionals.
2. Infrastructure for Innovation: The call for stronger infrastructure is timely. While Israel has a robust startup culture, scaling these ventures often requires access to advanced research hubs, funding programs, and institutional support. By incentivizing local investors, the government can reduce dependency on foreign capital and create a more self-reliant ecosystem. This is particularly important as global economic uncertainties persist.
3. Generative AI and Deep Tech: Eldarās prediction that āGenAI is eating softwareā reflects a broader trend toward automation and AI-driven solutions. Startups that can leverage proprietary data and integrate AI into deep tech applications will have a competitive edge. For example, companies like bananaz, which use AI to streamline engineering workflows, exemplify the kind of innovation that can disrupt traditional industries.
4. Defensetech and Dual-Use Technologies: The rise of defensetech as a growth sector aligns with Israelās historical strengths in military innovation. By commercializing dual-use technologies, Israeli startups can tap into global demand for solutions that address both security and civilian needs. This sector is likely to attract significant investment in the coming years.
5. Challenges for Traditional SaaS: As generative AI lowers the barriers to software development, traditional SaaS companies face increasing commoditization. To remain competitive, these companies must focus on domain expertise, unique customer access, and exceptional execution. The shift toward more complex, transformative solutions will reward agility and innovation.
6. IPO Market Recovery: The potential recovery of the IPO market in 2025 is a positive sign for the tech industry. However, as Eldar notes, the bar for going public will be higher, with a greater emphasis on profitability and unit economics. This shift reflects a broader trend toward sustainable growth and financial discipline.
7. Early-Stage vs. Mature Companies: The preference for early-stage startups in 2025 highlights the importance of agility and innovation in a rapidly changing market. Mature companies, while valuable, may struggle to adapt to new dynamics, particularly if they are burdened by high valuations from previous years.
8. 10Dās Investment Strategy: 10Dās focus on transformative technologies and deep tech positions it well to capitalize on emerging trends. Investments in companies like bananaz and Euno demonstrate a commitment to solving real-world problems through cutting-edge innovation. As these companies scale, they have the potential to become category leaders with global impact.
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Conclusion
The 2025 VC Survey paints a picture of an Israeli tech ecosystem at a crossroads. While the sector has demonstrated remarkable resilience, the challenges ahead are significant. By addressing talent gaps, strengthening infrastructure, and fostering innovation, Israel can continue to lead in the global tech race. As Rotem Eldar and 10D have highlighted, the time for action is now. The decisions made today will shape the future of Israeli high-tech for years to come.
References:
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