Israel’s Startup Nation Navigates War’s Challenges
For the past year and a half, Israel’s startup ecosystem has faced significant challenges due to the Swords of Iron War. Extended reserve duty has strained the operational capacity of startups and innovation hubs, generating uncertainty about the future of the sector. However, despite these difficulties, Israeli entrepreneurs have shown remarkable resilience.
In a recent interview, Teddy Nehmad, a prominent figure in Israel’s tech community and founder of C Capital Group, shared his experiences navigating the startup ecosystem during this period. C Capital Group invests in tech ventures across various fields, and Nehmad also founded the NGO Innovation Without Nations. Additionally, he recently launched Animove, the first social network powered by artificial intelligence.
Despite the challenges, Israeli entrepreneurs have continued to build successful ventures. In 2024, Israeli high-tech startups raised $12 billion, a 31% increase compared to the previous year.
When asked how he has adapted to these turbulent times, Nehmad stated, “Great entrepreneurs are tested during moments of crisis, and these situations reveal their true ability to navigate challenges. Resilience and adaptability are critical traits for any entrepreneur working in innovation.”
Nehmad noted that the initial months of the war brought a pessimistic outlook, leading to a decline in investments. However, as time passed and stability gradually returned, the situation improved. “By the end of the year, the overall picture was not as bad as initially feared,” he said.
AI Funding Surge
Globally, 2024 was defined by artificial intelligence, with nearly a third of all venture capital funding allocated to AI-related projects, surpassing $100 billion in total investment. This represents an 80% increase compared to 2023.
Regarding the surge in global AI funding, Nehmad explained, “On the surface, it might seem that Israel has fallen behind, as 2024 was a critical year for the early development stages of AI, and the war certainly didn’t help the country’s ability to compete in this space. However, even during this challenging year, we saw the launch of numerous AI projects despite the less-than-ideal conditions.”
Despite the challenges of the ongoing war, Israel has maintained a significant presence in the AI sector. Startups like Twine, an AI cybersecurity company, successfully raised $12 million in Seed funding; Converge Bio, a generative AI platform, secured $5.5 million in November; and Fermata, an agricultural technology firm using computer vision, raised $10 million in a Series A round led by Raw Ventures.
“Data shows that there was only a 6 percent decline in overall startup funding since last year, which is a surprisingly positive indicator and a strong vote of confidence in Israeli entrepreneurs and our technologies,” Nehmad highlighted. “That being said, this figure is somewhat misleading. We have seen increased concentration, with nearly half of the total investments flowing into just ten companies, while the overall number of funding rounds dropped by approximately 12 percent.”
As Israel focuses on recovery, prioritizing increased funding for a diverse array of startups is essential to revive the tech industry and bring it back to its pre-war status. Looking at past crises, such as COVID-19 and the 2008 financial crisis, the startup nation has demonstrated its ability to rebound and emerge stronger. It is anticipated that this trend will continue during the current period.
Having navigated previous crises, Nehmad observed, “the current crisis is unique in that the global tech industry did not come to a standstill as it did in past downturns. This created gaps, particularly in rapidly evolving fields such as AI and robotics, where innovation continued at full speed.”
He continued, “However, as with the conclusion of every crisis, we can expect a period of significant growth across all fronts. Investors are poised to seize the right moment to capitalize on the forthcoming wave of investment opportunities that will arise.”
While the war continues with an indeterminate end date, the Israeli tech industry persists in its growth and resilience during these difficult times. Startups have managed to adapt and innovate, fostering growth and maintaining momentum amid unprecedented circumstances. Israel has demonstrated an ability to pivot when needed, and startups will persist in bringing new ideas to address existing and future challenges both locally and globally.
