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Israel’s Startup Scene Shows Resilience Amid Economic Shifts
May 2025 was a dynamic month for Israeli tech, with startups pulling in over \$950 million across 18 funding deals, reflecting both the vibrancy and challenges of the local innovation ecosystem. While this represents a 30% decline compared to May 2024 — which was inflated by Wiz’s historic \$1 billion raise — the latest figures still position Israel as a formidable global tech player.
In a month defined by AI and deep tech investment, two standout mega deals fueled the momentum: AI21 Labs secured a \$300 million Series D, while quantum computing firm Classiq raised \$110 million in a Series C round. These deals underscore investors’ growing appetite for generative AI and quantum technologies.
Other notable rounds came from companies like Orca AI (\$72.5M), Empathy (\$72M), Ox Security (\$60M), Kela (\$60M), and PhaseV (\$50M) — each pushing boundaries in maritime autonomy, emotional wellness, cybersecurity, threat intelligence, and clinical trials optimization, respectively.
May also saw a wide array of startups making waves with disruptive ideas:
A stealth-mode defense-tech startup landed the biggest Seed deal of the year, channeling expertise from gaming and cybersecurity into battlefield innovation.
AI-based platforms for bereavement support, GTM systems, federated AI, and financial automation drew strong VC interest.
Startups like DeltaStem and others are leveraging AI to accelerate biotech, while others are aiming to reduce waste in retail and transform AppSec strategies.
Despite geopolitical tensions and a shifting global economy, Israeli entrepreneurs are adapting fast — pivoting toward sectors that blend commercial tech with defense, healthcare, and enterprise solutions.
What Undercode Say: 🔍
The data from May 2025 offers critical insight into Israel’s startup climate, especially in AI-driven and defense-adjacent sectors. A close look reveals key trends:
1. AI Still Dominates Investor Attention
AI21’s \$300M raise isn’t just a standout — it represents a larger shift toward generative AI as an enterprise standard. Startups offering AI observability tools, bereavement tech, and adaptive retail solutions also indicate how AI is diversifying across industries.
2. Quantum Computing Enters the Big Leagues
Classiq’s \$110M Series C is more than a funding milestone. It signals that quantum startups are moving from the lab to commercialization — a space previously reserved for elite research teams.
3. Cybersecurity Remains Israel’s Core Strength
With new ventures backed by veterans from Guardicore and VC giants like Greylock, it’s evident that cybersecurity remains a flagship sector. Even newer players in AppSec are drawing significant interest.
4. Defense-Tech is Surging Again
Since the October 7 attacks,
5. Enterprise SaaS Matures with Autonomy and Integration
From GTM automation to financial ops and federated AI, Israeli SaaS startups are evolving into platforms that deliver plug-and-play intelligence across complex enterprise systems.
6. Healthtech and Biopharma Get the AI Treatment
Platforms like DeltaStem and clinical trials optimizers are part of a broader trend of applying AI to optimize human biology, making Israel a growing force in biopharma innovation.
7. Shipping, Retail, and Creative Tools See Tailwinds
Orca AI’s massive dataset of 80 million nautical miles is fueling maritime AI leadership, while adaptive AI for retail and creative studio tools signal new niche verticals ripe for disruption.
8. Investor Confidence Remains Steady
Despite fewer mega-deals compared to 2024, the volume and diversity of investments show that early-stage and growth VCs are still betting on Israeli tech — just with more selectivity.
Fact Checker Results ✅
📉 The reported 30% decline compared to May 2024 is accurate, largely due to a one-time \$1B deal by Wiz last year.
🧠 The top-funded startups — AI21 and Classiq — align with global investment trends in generative AI and quantum computing.
🇮🇱 Defense-tech interest is surging post-October 7, a verifiable trend echoed in funding and founder focus areas.
Prediction 🔮
Given the momentum in AI, quantum, and defense applications, Israeli tech funding in Q3 2025 is expected to remain strong, especially in sectors that combine enterprise software with national resilience. Expect to see continued investment in AI-driven infrastructure, cyber-defense platforms, and biotech integrations, with a possible surge in dual-use civilian-defense innovations as the geopolitical landscape evolves.
References:
Reported By: calcalistechcom_351077004506e0b6f3c8ab24
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