Israeli high-tech sector is showing signs of a slowdown, with stagnant job growth and fewer startups being launched, even as 2025 marks a record year for exits. That’s according to a new report by the Israel Innovation Authority on the state of the industry.
Once considered the clear growth engine, the report found the sector’s growth rate is now slower than the broader economy. The high-tech output has remained almost unchanged for two years, standing at about 317 billion shekels ($83 billion), or 17% of Israel’s total GDP.
Employment has also plateaued. In the first half of 2025, there were 403,000 high-tech employees — 11.5% of the workforce — a slight increase from 2024. But the share of high-tech workers in the economy has been frozen since 2021. Employment growth has slowed to under 2% annually since 2023, compared to more than 5% for most of the previous decade. The number of research and development workers — considered the sector’s spearhead — fell by 6.5%.
The report also highlighted a steep decline in venture capital funding. Israeli VC funds raised 80% less capital compared to the peak in 2022, a sharper drop than in the U.S. or Europe. Only about 500 startups were founded in the past year, compared to more than 1,000 a decade ago.
Still, the Innovation Authority pointed to signs of resilience. Google’s $32 billion acquisition of cybersecurity firm Wiz made 2025 a record year for high-tech exits, while startup fundraising rebounded in the second quarter to its highest level since 2022. High-tech exports rose 5.6% in 2024 to $78 billion, reaching 57% of Israel’s total exports in early 2025 — the highest ever.
Startup funding also returned to 2019–2020 levels, with Israeli companies raising $10.6 billion in 2024, making Israel the world’s fifth-largest tech hub after San Francisco, New York, London and Boston. Cybersecurity and enterprise software accounted for three out of every five investment dollars in 2025.
Dr. Alon Stopel, chair of the Innovation Authority, said the data point to “a worrying slowdown in employment and entrepreneurship.” CEO Dror Bin added: “These are not marginal figures but an indication of risk, which we are taking very seriously.”
At the same time, the report underscored Israel’s growing global role in “deep-tech” — advanced technologies based on cutting-edge research. A joint deep-tech report with international firm Dealroom found that about 1,500 deep-tech companies operate in Israel, raising more than $28 billion between 2019 and 2025 from 300–400 VC funds annually, about a quarter of them Israeli.
The combined valuation of Israeli deep-tech companies has surpassed $178 billion, 15 times higher than a decade ago, with 39 unicorns and “centaurs” (companies with $100 million-plus in revenue) emerging. The main areas of growth are artificial intelligence, medical devices, semiconductors, cybersecurity and agri-food tech. On average, 28 deep-tech exits occur each year, with an average value of $220 million. Israel leads in cybersecurity, capturing more than 20% of global deep-tech investment.
The authority expects 2025 to be a record year for quantum computing in Israel, with over $300 million in investments already reported.
“2025 reveals the double story of Israeli high-tech,” Bin said. “On one hand, Israel is consolidating its role as a global deep-tech hub, second only to the U.S. in the Western world. On the other, the report points to troubling trends, while worldwide governments are investing hundreds of billions, directly entering tech industries and shaping national value chains in semiconductors, AI and energy. Israel must respond to these changes or risk losing its competitive edge.”
Dror Bin, CEO of the Israel Innovation Authority
Photo: Amit Sha’alAsked about Prime Minister Benjamin Netanyahu’s recent remarks on a possible autarkic economy — one with no international trade — Bin replied: “High-tech is Israel’s natural resource. It’s hard to imagine an Israeli economy without it, and there is no Israeli high-tech without foreign customers, investors and multinationals. Eighty-five percent of Israel’s R&D funding comes from abroad. Israeli high-tech companies are exporters from day one, with 57% of Israel’s exports based on high-tech.”
Bin added that multinational firms are “an inseparable part” of the sector. “They are the largest employers, they pay the highest salaries, they acquire Israeli companies as they mature, and in doing so they drive the entire industry forward. High-tech is, by definition, a global industry — and Israeli high-tech must remain connected to the world.”