Why Israeli startups continue to raise billions despite the war

The war does not stop investments in startups in Israel. On the contrary. Since the beginning of the conflict – on October 7, the day of the Hamas attack on Israeli territory – new Israeli technology companies have raised a record amount of 3.1 billion dollars. In line with the best years. As if nothing was happening in the Gaza Strip. A fact that tells another side of the war. And perhaps the innovation economy in general. Which is increasingly establishing ties with the world of military technology. Redesigning paradigms. Not innovations born for ‘civil’ purposes, then adopted by states and armies. But innovations born for military purposes. Which raise funds and financing precisely thanks to the fact that they are technologies created for military purposes. A third of the funds invested in Israeli startups since the start of the war have gone to companies dealing with military security, from cybersecurity to technologies related to artificial intelligence.

Israel data: record investments in military security startups

Data from Startup Nation Central (Snc) record an excellent state of health of Tel Aviv’s innovative new businesses. Some examples. Next Insurance – a company specializing in insuring Israeli businesses abroad – has the record for the highest investments in a single company with $265 million from two foreign venture capital funds. But overall the whole sector is doing well. For SNC, Israel’s tech sector has remained strong despite challenges such as a shrinking workforce, as around 15 percent of tech workers have been drafted into the military reserve.

“With attractive valuations and significant growth potential, Israel’s tech ecosystem is showing characteristic resilience,” Avi Hasson, Snc’s chief executive, said in a statement. Predicting a new wave of innovation and opportunity for the industry after the war. The technology sector is one of the cornerstones of the Israeli economy and accounts for 16% of jobs in Israel. More than half of Israel’s exports, a third of its income taxes and nearly a fifth of its overall economic output, according to data from the Bank of Israel.

Why we continue to invest in technologies (and startups)

The Israeli data may appear counterintuitive. But it is in line with what is happening on the world stock markets which, despite wars, international tensions and broken old orders, continue to grow, setting record after record. And investments in technologies are no exception. On the contrary. Today they play a particular role: they promise to preserve the very future of nations. In Technologies of the Empire (Luiss), Francesca and Luca Balestrieri write that “the novelty of the 21st century lies in the relationship between innovation, industrial base and defense: the dual character, civil and military, of discontinuity technologies has become inextricable, the interdependence between the two spheres is inevitable, the dimension of pervasive security”. A clear break compared to the twentieth century, when innovations ‘became’ a military issue, after having been created for scientific or research purposes. Most of them at least. Innovation is important for the present and future of states themselves, in the midst of a reflux after the years of globalization (decoupling), in a new “negotiated disorder” where small and large empires emerge, the authors write.

More than 20 new funds have been established in Israel since October 7, half of which are specifically designed to respond to the urgent financing needs of startups due to the impact of the war. These funds have collectively raised over $1.7 billion. Money is needed to support startups and finance new ones. In sectors considered strategic. And look for technologies capable of responding to the most urgent military challenges. Artificial Intelligence is the number one suspect.

Transform and control

“Technology is the power to transform and control,” write the authors of Technologies of Empire. And this ability would have been “strengthened in the transition from the digital era” that of the internet until a decade ago “to that of artificial intelligence; a further, dizzying increase in the ability to shape the material world, modify economic relationships and question the connections of society and the structures of culture”. A ‘growth of power’ that would not be destined to wane in the face of conflicts or hypotheses of conflicts between new world hegemonies. On the contrary. It would draw new lifeblood from the conflict. Until now it was thought that technology in itself was neutral and that its use caused danger and threats to humanity. This may no longer be the case.