High-Tech in Wartime

How Startup Nation and the IDF support each other.

Cityscape of Tel Aviv, also known as Silicon Wadi. (Photo by Shai Pal on Unsplash)

For four years I have been reporting on Israel’s high-tech sector and how it intertwines with its military counterpart. One of the things that struck me early on in my career (and which has only been reinforced since October 7) is the symbiosis between entrepreneur and soldier. Together, they form a loop between two key identities that speaks to Israel’s effect on its people as much as their effect on the country itself. The tech industry as of 2022 accounts for 18.1% of the entire GDP and 48.3% of the country’s exports - and many citizens can claim to be veterans of both these worlds. 

In my time as a reporter for CTech, the English version of one of Israel’s largest newspapers Calcalist, I have spoken to hundreds of young Israeli founders and overseas investors who see Israel’s high-tech community as an essential part of the future of the country and bound largely to the army they all served in. 

After October 7 I spent time talking to these folks. I met with founders virtually from their bases in the North as they tried to secure deals from their tents. At one point 15% of Startup Nation was indiscriminately drafted into war but for them, life goes on. 

One industry whose success became clear in Israel was cybersecurity, whose companies are founded to thwart ongoing cyberattacks from Iran and its proxies. Founders who serve in elite IDF intelligence units such as Unit 8200 learn firsthand how attacks are planned and implemented against their country while serving. They then develop the tools required to protect the government, and these then trickle down to private businesses and citizens - who then develop the tools to protect first the government, and then eventually businesses and citizens on the private market. The American government gave birth to GPS and the microwave oven; the IDF is spearheading AI and defense systems. 

This results in blockbuster deals across the private sector, such as Oasis’s recent $35 million funding round, or Island securing an additional $175 million in financing, raising its valuation to more than $3 billion. As for Israel’s weapons companies - they are seeing a 200% jump in resumes during their recruitment efforts, suggesting many are departing from the IDF and eager to enter the private enterprise of war. And for good reason: 2023 amounted to more than $13 billion in Israel's defense exports, an all-time high despite attempts to delegitimize Israeli companies more broadly.

In total, June 2024 saw more than $556 million of investment in Israeli high-tech startups across 12 deals - showing signs of a steady return to post-pandemic, pre-war levels. It had followed two straight months in which the billion-dollar mark was reached and brings the total 2024 number to $4.5 billion, a 36% increase compared to the first half of 2023. This brings the total amount raised to $5.6 billion since the start of the conflict.

Some founders started companies following their personal experiences on October 7. In November last year, I spoke with 21-year-old Arad Fruchter, a Nova festival survivor who sped up the development of his events management app with his co-founder to help facilitate fundraising efforts and spring the country back from frozen fear.

“I have here an opportunity to change something I already have to help other people,” he explained from his army base. “If I help people with fundraisers, I am helping everyone.”

I also spoke with investors looking to protect Israel by investing in the economic stability of its citizens at home. Those who may have considered starting to invest in Israel might be spooked, but those who have worked with Israelis before know now is the time to step in. “Israel has always needed to fight and break barriers, and now we see this is truer than ever,” I was once told by Eyal Niv, Managing General Partner at Pitango Venture Capital. “Anytime we’re threatened, we become more Israeli… we become stronger, more dedicated, and more resilient.”

This is not to say this loop between founder and soldier is perfect. The system has been criticized for favoring Ashkenazi men and neglecting female, Haredi, or Arab founders, although some government programs supported through a collaboration between the Directorate General of Labor and the Israel Innovation Authority are designed to combat this through expanding academic training programs in high-tech fields. Additional volunteer-driven organizations like Iron Nation were founded by investors from funds in Israel to ensure business continuity for the startup community. As is typical in Israel by now, gaps are filled by those with experience and passion from both the soldier and entrepreneur part of the loop.

So what can explain the surprising success of Startup Nation and its connection to the IDF? In my time as a reporter in the country, one word kept on coming up: Resilience. The idea that Israel’s citizens have no choice but to overcome challenges both local and international breeds a society that rises to challenges. The IDF is a necessity for the country’s survival. Entrepreneurship is but an ongoing fight to survive in a changing world. Both encapsulate the traits needed for success. 

Today this synergy has given birth to one of Israel's most promising new sectors: Defensetech. And while the country’s battles are moving from the ground to online, so too are its successes. So long as the IDF keeps the country safe against its enemies, Startup Nation will never be far behind.

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James Spiro is a tech journalist at CTech by Calcalist, one of Israel’s largest English-language newspapers. He has interviewed more than 500 founders and moderated conferences on three continents. He is active on X and can be followed via his handle, @JamesSpiro.