Fueling the future: The urgency and benefits of investing in Israeli tech now
As capital continues to consolidate in “safe” markets and macroeconomic uncertainty drives global caution, Israel is emerging as an unexpectedly compelling investment opportunity. See Why 2025 is a great year to invest in Israeli Tech. Despite geopolitical volatility, this innovation-driven economy is once again showing why resilience, talent, and adaptability are among its core assets.
While many of the headlines focus on risk, a growing chorus of seasoned investors, including Ezra Gardner, co-founder and Chief Investment Officer of US-based Varana Capital, is emphasising the strategic urgency of investing in Israeli tech now, rather than delaying.
A Crisis Becomes a Catalyst
In a candid interview with The Times of Israel, Gardner outlined the magnitude of the capital shortfall caused by the outbreak of war with Hamas. The conflict disrupted both domestic investment and the critical inflow of foreign capital that has long fuelled the Israeli startup ecosystem.
And yet, Gardner’s commitment hasn’t wavered. He continues to fly to Israel monthly from the US, despite suspended direct flights, to meet with founders and support portfolio companies on the ground. His message is clear:
“We have invested in Israeli startups for many years, but the outbreak of war has created a severe problem for the influx of foreign capital on which the ecosystem depends… we believe that investing in Israel right now is an opportunity.”
This conviction has translated into action through the launch of a dedicated wartime investment vehicle.
A Strategic Lifeline for Deep Tech
To address the wartime funding vacuum, Varana Capital launched the Chai 10x, a $50 million emergency fund focused on Israeli deep tech startups positioned for commercial scale. The fund has already made 11 investments in companies operating at the intersection of technological depth and market readiness, with a particular focus on, Hardware and deep tech, Agritech and MedTech, Robotics and smart mobility
These aren’t speculative early-stage moonshots. They are validated ventures, often with paying customers or pilots in place, now struggling with access to capital due to reduced investor travel and geopolitical risk aversion.
Gardner notes that valuations are highly favourable, term sheets are founder-friendly, and technical innovation continues at pace, underscoring the temporary nature of this dislocation.
Israel’s hour of need.
Beneath what may have looked like surface-level stability in 2024, the structural picture tells a different story. According to data from RISE Israel and Israel Advanced Technology Industries (IATI):
Foreign direct investment into Israel fell by nearly two-thirds compared to 2023
Israel’s tech sector has seen a wave of layoffs, even among strong, profitable companies. Unlike last year’s 'emergency cuts,' driven by wartime pressures, sources say the current downsizing is a deliberate and strategic decision. Major firms are choosing to streamline operations from a position of strength, despite record revenues, healthy finances, and an increasingly optimistic outlook
Redundancies across Israel VCs have increased Globes
Israeli VCs reported record-low dry powder, limiting their ability to lead or join funding rounds
Around one-third of all VC capital was absorbed by a small handful of mega-deals
Sectors such as MedTech, Robotics, and AgriTech were left significantly underfunded, while cybersecurity continued to attract disproportionate positive attention
Moreover, the top 10 Israeli VC investments in 2024 accounted for nearly 50% of all capital raised, up from 25% in 2023. This concentration level suggests a shrinking beneficiary pool and declining capital mobility within the local ecosystem. Hence international investment is critical in this time.
Headline Risk vs Long-Term Resilience
Political uncertainty and macroeconomic pressures are undeniably contributing to global investor hesitancy. In February this year, Moody’s Investors Service downgraded Israel’s credit rating, citing:
“Very high political risks that have weakened economic and fiscal strength.”
The report also highlighted concerns over judicial reform, war escalation, and tech sector vulnerability, given its centrality to Israel’s GDP and tax base.
Yet Moody’s also provided a pathway to an improved outlook:
“We may stabilise the outlook if there are clear prospects for a durable cooling down of the military conflicts… allowing Israel’s institutions to formulate policies that support the recovery of the economy and public finances.”
This aligns with the historical pattern: Israel has repeatedly rebounded from crises with structural reform, institutional resilience, and a globally competitive tech sector at the core of its recovery.
Shoots of Stabilisation: Optimism for 2025
Amid continued challenges, important signs of stabilisation are emerging. International flights are beginning to re-open. United Airlines has resumed flights to Tel Aviv, a step toward restoring international business mobility. British Airways will begin daily flights starting April 5. Iberia and Italy’s Neos will also restart services in the coming months. KLM, the Dutch airline, will resume flights to Israel in June, along with European low-cost carrier EasyJet, which will operate routes to and from multiple destinations.
Global IPO calendars are slowly reopening, offering exit potential from late 2025 onwards
Israeli VCs are restructuring with leaner, more disciplined operations, preparing to re-enter the market.
War-related expenditures are declining, bringing down a fiscal deficit that peaked at 6.8% of GDP in 2024
These signals, while modest, point to the early stages of a strategic rebound.
Public-Sector Signal of Long-Term Commitment
In parallel, the Israeli government has introduced YOZMA 2, a contemporary reimagining of the 1990s programme that seeded Israel’s original VC industry. This initiative includes:
30% government leverage for institutional investors backing Israeli-focused VC funds,
Incentives to attract domestic capital from pension funds and insurance providers. Planned deployment across 2025–2026
While YOZMA 2 is not designed to solve the immediate funding crunch, but it sends a crucial long-term message: the Israeli government continues to see technology as a cornerstone of economic and national resilience.
Time to Lead
In 2025, global investors have no shortage of destinations for capital deployment. But few offer what Israel does at this specific moment:
Resilient, world-class with internationally accredited human capital
Validated deep tech ventures with real commercial traction
Favourable entry valuations amid temporary turmoil
Clear government commitment to tech ecosystem recovery
The Israeli tech sector is experiencing a rare moment of funding scarcity amid strong fundamentals. For investors with a long-term horizon and conviction in innovation-led growth, this is not a moment of fear, it is a moment of leadership.
The question is: who will prepared to recognise the window for what it truly is?
Article by Jon Simmons- Content Strategist for Tech Founder and Investment Houses that specialise in investing in Israel.
The Israel Stock List Ebook updated for 2025 is now available for only $15. This simple eBook provides a comprehensive list of all the Israeli-founded companies that can be purchased on the international markets.
Jon Simmons is a bi-lateral trade investment advocate for Israel and its supporters, and content strategist for ambitious businesses looking to grow online.
