Tel Aviv [Israel], December 22 (ANI/TPS): Israel's technology sector saw a sharp rebound in 2025, with estimated private funding reaching $15.6 billion, according to early figures released Monday by Startup Nation Central. At the same time, overall deal volume fell to 717 rounds, the lowest in a decade. The data suggest a market increasingly focused on fewer, larger, and more mature companies.
In an exclusive interview with The Press Service of Israel, Yariv Lotan, VP of Product and Data at Startup Nation Central (SNC), highlighted the significance of the numbers. "The year-end figures show direction, not just recovery," he said. "Investors are making fewer decisions and writing much larger checks. A record $10 million median deal size, and mega-rounds capturing around 50% of total capital, signal a market that has recalibrated toward scale, maturity, and conviction."
SNC is a Tel Aviv-based non-profit that promotes Israeli startups and innovation.
Lotan also noted the risks of concentrated funding. "When capital concentrates, access becomes uneven, and early-stage experimentation can narrow. Israel's long-term strength depends on supporting new founders while enabling proven companies to scale," he said. He added that AI is helping offset tighter early-stage funding conditions, allowing founders to build products and validate markets with fewer resources.
Mergers and acquisitions dominated headlines. Total M&A value reached $74.3 billion across 150 deals. Two transactions drove much of the total: Google's $32 billion acquisition of Wiz and Palo Alto Networks' $25 billion purchase of CyberArk. Even excluding those, M&A value rose 12% compared with 2024.
"Large acquisitions can reduce the number of independent scale-ups in the short term, but they also recycle capital, create experienced operators, and fuel the next generation of companies," Lotan said. He emphasized that multinational buyers, including Nvidia, are anchoring R&D leadership locally rather than just acquiring headcount.
Sector trends show that capital continues to flow to Israel's global strengths. Business Software led private funding with $4.5 billion, followed closely by Cybersecurity at $4.1 billion, where median deal size hit $20 million double that of Business Software. Health Tech led in deal volume, completing 152 rounds.
Early-stage funding recovered to $3.9 billion, mid-stage funding jumped to $5.2 billion, and late-stage investment moderated at $2.5 billion. Mega-rounds accounted for roughly half of total private funding, highlighting the growing concentration of capital in fewer companies. Investor participation narrowed to 592 active investors, though 60% were international, signaling sustained global confidence.
Public company funding also grew to $10.3 billion, driven by U.S.-listed offerings from companies including Navan, eToro, and Via, as well as PIPEs and convertible bonds.
"2025 was not about a return to business as usual; it was a pivot toward high-conviction maturity," said SNC CEO Avi Hasson. "When we see global giants like Nvidia expanding their operations here, alongside a record $74.3 billion in M&A activity, it confirms that Israel is not just a source of innovation it is a global hub for critical technologies like AI and Cybersecurity."
Looking ahead, Lotan identified to TPS-IL semiconductors, AI infrastructure, and climate and energy transition technologies as sectors likely to challenge the current leaders in 2026. He warned that while larger early-stage deals improve durability, fewer rounds could narrow the pipeline of new startups. "The likely outcome is a narrower funnel with higher maturity entering Series A, but a risk of missing breakthroughs that require longer exploration cycles," he said. (ANI/TPS)
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