Israeli startups raised approximately $8.6 billion in the first half of 2026, up about 45% from the roughly $6 billion raised during the same period last year, according to a report released by Poalim Tech and Dealigence.
The increase came despite ongoing security challenges and economic uncertainty, including the recent conflict with Iran. At the same time, the number of funding rounds fell by about 35%, suggesting investors are concentrating larger sums of capital in a smaller number of companies.
The report found that cybersecurity remained one of the strongest sectors in Israeli tech, with investment in cybersecurity companies more than doubling compared with the first half of 2025. Funding in the sector remained steady even during periods of heightened security tensions, reaching about $580 million in March.
The trend toward greater investor selectivity was also reflected in the profile of companies securing funding. Serial entrepreneurs accounted for a growing share of fundraising activity, with the proportion of rounds raised by repeat founders rising from 34% in 2025 to 39% during the first six months of 2026.
A similar pattern emerged in mergers and acquisitions. The number of M&A transactions involving Israeli technology companies declined by about 16% year over year, falling from 100 deals to 84. However, average deal values increased by roughly 10%, excluding major transactions involving Wiz and CyberArk. Total M&A volume reached approximately $10.7 billion during the first half of the year.
The report also pointed to diverging trends in the technology labor market. While multinational technology companies continued to implement layoffs and cost-cutting measures amid economic uncertainty, artificial intelligence-driven efficiency efforts and a weaker U.S. dollar, employment at Israeli early- and mid-stage startups grew by about 2%.
According to the report, younger companies have generally maintained leaner workforce structures, limiting the need for additional staff reductions.
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Investment in cybersecurity companies more than doubled compared with the first half of 2025
Poalim Tech said conditions are becoming more challenging for early-stage and growth-stage startups as competition for investment intensifies and operating costs rise. Exchange-rate fluctuations and increased investor scrutiny could shorten the financial runway of some companies, potentially forcing them to raise capital earlier than planned.
The report also highlighted the emergence of a growing number of AI-native startups operating with very small teams and, in some cases, a single founder. These companies are increasingly able to develop products and achieve milestones with limited early-stage funding.
"One of the most interesting findings in the report is that the AI revolution has not changed the fact that young companies still need talented people in order to grow," said Adam Lazovski, co-founder and CEO of Dealigence.
"While some large technology companies are focused on streamlining operations and reducing headcount, Israeli startups continue to hire. This is not surprising, as most of them operate from day one with small, highly focused teams," he said.
"Experience shows that it is often during periods like these that the most successful companies are built — companies that know how to do more with less, develop outstanding products and think about their business model from the earliest stages."