Fire and Capital: Why Israel Remains a Hotbed for Global Venture Capital During War?

A paradox of conflict and capital

Israel's startup scene is defying conventional wisdom. Despite multi‑front fighting since October 2023, the country has seen venture funding climb: about $9.3 billion in 2023, $12.2 billion in 2024 and $15.6 billion in 2025, according to reporting aggregated by CTech, the English tech channel of Calcalist (כלכליסט). From January to mid‑March 2026 alone there were at least 57 disclosed tech financings in a nation of roughly 9 million — an annualized pace near 274 deals — and Israel accounted for roughly 4% of global deal volume in that month while representing about 0.1% of world population.

Why investors still flock

Several structural forces explain the inflows. Cybersecurity and AI have become dominant: network security (now deeply tied to AI) rose from about 29% of deals in 2023 to nearly 39% in 2025, while other sectors such as agriculture, climate and automotive have largely faded from disclosed rounds. That concentration is driven by global demand for digital‑infrastructure protection, the prominent role of military‑intelligence talent — many founders trace their careers to Unit 8200 — and a high‑profile M&A narrative that signals outsized exits. It has been reported that Google recently closed a roughly $32 billion purchase of Wiz, a deal that market participants say has amplified a "Wiz effect," prompting global investors to chase early Israeli cyber startups.

Policy, geopolitics and fragility

Beijing‑style industrial policy? Not exactly, but Jerusalem is acting. Israel’s parliament approved a new R&D law and associated incentives; it has been reported that government‑guided funds will channel about $450 million into local VC, intended to lever over $2 billion in private financing to shore up investment during wartime. Geopolitics matters too: while many conflict zones see foreign direct investment collapse, Israel benefits from close ties with Western tech buyers and the strategic premium for cyber tools—an element tied to broader U.S. and allied digital security priorities rather than trade liberalization or sanctions relief.

The trade‑off: resilience or narrowing?

The numbers are striking. But there is a danger in the composition: capital is concentrating in a narrow set of security‑adjacent technologies. Is war powering innovation or hollowing out a broader innovation ecology? Reported deal flows suggest the latter risk — wartime urgency and ideological screening can prime certain sectors while starving others that address long‑term global problems like food, climate and health. Investors and policymakers must ask whether this inflow is durable, or simply a combustible burst of funding that will burn out once the strategic premium fades.