Israeli high-tech ended the third quarter of 2025 with a mixed picture: sharp declines in fundraising and investor activity on the one hand, and record-breaking levels of mergers and acquisitions on the other. According to Startup Nation Central’s (SNC) quarterly report, the year is shaping up to be one of the most significant in the history of the industry — but also one of the most volatile.
Private capital fundraising amounted to $2.4 billion in Q3. Stripping out the mega-round by Safe Superintelligence, the decline is stark: a 38% drop compared to Q2, and a 59% fall when including the deal.
Year-over-year, the picture is marginally better: a 9% increase versus Q3 2024, though this is largely due to the composition of deals rather than broad market strength.
Avi Hasson, CEO of Startup Nation Central, framed the quarter as transitional:
“Funding has slowed, and investors have become more discerning, but M&A activity has continued to break records. We are seeing fewer rounds, but at higher volumes, which indicates confidence in companies that are ready to expand.”
The number of deals fell to 141, down 24% from Q2 and 38% from a year ago. This signals a more selective investor mindset. The median funding round hit a record $10.5 million, 50% higher than in 2024 — a clear indication that only mature, stable companies are securing capital.
As in past quarters, cybersecurity remains the undisputed leader, raising $800 million, nearly 40% of all funding. In the first nine months of 2025, Israeli tech raised $11.9 billion, a 13% increase compared to the same period last year, even as the total number of deals dropped from 725 to 569.
Investor Base Shrinks But Foreign Interest Holds
Another concerning signal is the shrinking investor base. Only 230 active investors participated in Q3 deals — a 20% quarterly drop and the lowest since early 2024. Venture funds and angels are showing heightened caution, preferring to sit on the sidelines.
Yet international interest remains steady: foreign investors accounted for 57% of all activity. This suggests that despite domestic caution and global geopolitical turbulence, Israel remains a magnet for global capital, particularly in defense-related technologies.
M&A: Historic Surge Led by Cyber Deals
In stark contrast to fundraising weakness, the M&A market is booming. Q3 registered 31 transactions worth $31.8 billion.
The standout was Palo Alto Networks’ $25 billion acquisition of CyberArk — the second-largest deal in Israeli high-tech history. Other notable exits included the $2 billion acquisition of Verint Systems. The median deal size hit $269 million, showing that like fundraising, consolidation is concentrated in large, strategic plays.
Cyber once again dominated: 58% of total M&A value came from cybersecurity deals, underlining its status as Israel’s premier export sector.
Cumulatively, M&A in 2025 has reached $71 billion, nearly five times 2024 levels. Of this, $41 billion were first-time acquisitions of Israeli firms, triple last year’s figure and an all-time record.
Public Markets Stir from Stagnation
Capital markets, long frozen, showed signs of life. The third quarter featured two major IPOs: eToro raised $700 million on NASDAQ, while Via raised $493 million on the NYSE. Analysts note that while these are exceptions rather than a trend, they may signal a reopening of the window for select Israeli tech names.
Conflicting Data: Leumitech Report Shows More Nuance
Parallel to SNC’s report, Leumitech and IVC released their own figures, painting a slightly different picture. Their survey shows $2.23 billion raised in 116 rounds, a 24% quarterly drop and 10% annual drop.
However, excluding mega-deals above $200 million, they identify an opposite trend: a 20% increase compared to Q2 and a 50% increase year-on-year.
Generative AI joined cyber as a major magnet for investment. Together, the two sectors accounted for 60% of capital raised across 41 rounds.
Mia Eisen-Zafrir, CEO of Leumitech, emphasized resilience:
“The data reveals consistent stability of Israeli high-tech despite local and global uncertainty. Israeli entrepreneurs are entering the world of AI with strength, with the potential to lead in this segment as well.”
Strategic Context: Transition Amid Global Headwinds
The duality in Q3 — weak fundraising but record M&A — underscores a tech ecosystem under pressure yet still viewed as a global strategic asset. Cybersecurity remains Israel’s strongest card, drawing capital, buyers, and international attention even in volatile conditions.
But the contraction in active investors and deal count reflects deeper concerns about Israel’s political risk profile, the lingering war in Gaza, and shifts in global capital flows. If current trends persist, insiders warn of potential stress on Israel’s ability to sustain record defense-tech exports in the coming years.
Would you like me to add an investor/defense angle sidebar (e.g., “Why global defense giants are doubling down on Israeli cyber”)? That would position this as a premium analysis piece for investors and policymakers.
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