Less Funding, Bigger Deals: Israel’s High-Tech Paradox

High-tech

The third quarter of 2025 was full of contrasts for Israeli high-tech. On the one hand, startups raised significantly less money from private investors. On the other, mergers and acquisitions broke records, with mega-deals reshaping the technological landscape.

According to the latest report from Startup Nation Central, private fundraising amounted to about $2.4 billion. This represents a sharp drop: nearly 40% less than the previous quarter (and as much as 59% less if including Safe Superintelligence’s $2 billion mega-round). However, compared to the same period in 2024, volumes were slightly higher. An interesting sign: there were fewer deals, but they were much larger. The median round size reached $10.5 million, a record that reflects a stricter selection of projects, but also growing confidence in companies ready to scale.

While investors exercised greater caution, major corporations did not hesitate to open their checkbooks. The mergers and acquisitions market surged, reaching $31.8 billion in transactions in just three months. The most spectacular deal was Palo Alto Networks’ $25 billion acquisition of CyberArk, the second-largest acquisition in the history of Israeli tech.

At the same time, Verint Systems was acquired for $2 billion, and several cybersecurity startups such as Aim Security and Findings also changed hands for several hundred million. As a result, cybersecurity accounted for more than half of total exit value, reaffirming its role as the sector’s growth engine.

Over the first nine months of the year, the trend has been just as striking. Israeli startups raised $11.9 billion, a 13% increase compared to 2024, but with far fewer transactions than in previous years. However, it is on the exit side that 2025 will go down in history: with $71 billion in mergers and acquisitions, Israel set an absolute record, nearly five times more than a year earlier. The mega-deals of Wiz, acquired for $32 billion, and CyberArk were the main drivers. At the same time, IPOs began to regain momentum, with successful listings by eToro on Nasdaq ($700 million) and Via Transportation on the NYSE ($493 million).

“Q3 2025 illustrated a market in transition. Funding is slowing and investors are becoming more selective, but mergers and acquisitions have reached historic highs. We are seeing fewer rounds, but at record sizes, signaling confidence in companies ready to scale. At the same time, international buyers are making some of the boldest bets we’ve ever seen on Israeli tech, particularly in cybersecurity,” noted Avi Hasson, CEO of Startup Nation Central.

Cybersecurity remains the spearhead of this dynamic. It alone attracted nearly $800 million in private funding during the third quarter, or 38% of the total, and also accounted for the majority of acquisitions. Another striking figure, however, is the continued decline in active investors: only 230 were recorded in Q3, 20% fewer than the previous quarter and the lowest level since early 2024. Nevertheless, Israel’s tech scene continues to attract interest from abroad, with foreign investors still making up 57% of the total, proof of the ecosystem’s enduring global appeal.

Caroline Haïat