Israel’s long war has produced an unexpected wave of innovation, and many of the newest startups are being founded by IDF reservists coming back from the front lines, says Kerem Nevo, vice president of growth at the Israel Innovation Authority.
Nevo said the authority is seeing “a 50% increase in demand and also in quality” in one of its earliest-stage grant programs, the Tnufa (Ideation) Program, which gives around $80,000 to entrepreneurs who “just have an idea.”
Many of those founders spent the last two years in reserve duty, going through real-life challenges and trying to solve them. They are returning home with battle-tested experience and, as Nevo put it, “this idea of how to solve real life problems.”
These companies are not building another app or pure software play. They are part of Israel’s deep tech wave: startups tackling “one of the bigger problems or challenges that human beings are facing” in health, transportation, energy and more. Deep tech ventures, Nevo noted, need more capital and time, because “the technological risk will not go down in the first couple of years.”
Despite war, political turmoil and rising antisemitism, the money is following.
“I think investments in Israel are doing well, very good, more than we have expected,” Nevo said, adding that both funding rounds and M&A activity have risen since 2023. Even excluding the year’s biggest exits, “the first half of 25 is as big as the entire year of 23 was. So that’s pretty amazing.”
For foreign investors, she argued, that combination of proven resilience and attractive valuations makes this a compelling entry point. Companies that survived COVID, the 2021 tech bubble burst and war “were built to last, were built resilient and agile, and were able to go through so much.”
Israel’s technologies have also been proven “in the battlefield” and “in the sky,” particularly in deep tech.
By global standards, Nevo said, Israel is already “the next hub after the US” for deep tech, ahead of Europe, and “super competitive in all the important fields, such as semiconductors, quantum AI and AI applications and medical health.”
Still, she is watching the risk of brain drain closely.
Some Israelis are leaving for quality-of-life or emotional reasons, even as new immigrants arrive. The government’s new tax reform aims to make it “as easy as possible” to come back by offering “positive incentives” and removing “negative incentives.”
Nevo’s resolution for 2026: Keep nurturing the post-reserve deep tech generation, and make sure more of the big, mature companies that grow out of it stay fully Israeli.
Watch the full conversation:
Podcast 02.12.2025
(Credit: ILTV)
