Despite the war that has raged for almost two years since Oct. 7, 2023, Israel’s high-tech industry posted a record year for exits and cemented its global leadership in Deep-Tech. Nevertheless, it faces stagnation in jobs, output and venture capital fundraising, according to a report released Wednesday by the Israel Innovation Authority (IIA).

The annual “Status Report on Israeli High-Tech 2025,” published alongside the first-ever “Israeli Deep-Tech Report” prepared with DealRoom, a database management company based in Amsterdam, found that more than 1,500 Deep-Tech companies are active in Israel, raising more than $28 billion since 2019.

Deep-tech refers to breakthrough technologies rooted in scientific discovery and advanced engineering, developed to tackle complex global challenges and to open entirely new industries.

The cumulative valuation of private Israeli Deep-Tech firms now exceeds $177 billion, 15 times higher than a decade ago.

Israel leads the world outside the United States in Deep-Tech fundraising, with dominant positions in AI, semiconductors, medical devices, cybersecurity and AgriFood. The report noted that Israel attracts 20% of global cyber investments and about 10% of global medical device and AgriFood investment.

At the same time, the report underscored troubling macroeconomic signals. High-Tech output has been stagnant for two consecutive years, holding steady at 17% of GDP, while R&D employment fell 6.5% in the first half of 2025. Venture-capital fundraising by Israeli funds has plunged nearly 80% since its 2022 peak, and new company formation has dropped to half the level of a decade ago.

“This is a moment of truth,” said Dror Bin, CEO of the IIA. “On the one hand, Israel is consolidating its position as a global Deep-Tech center, second only to the U.S. On the other hand, output is flat, R&D roles are shrinking, and entrepreneurship is declining. These are not marginal data points but indicators of risk we take very seriously.”

Gila Gamliel, Minister of Innovation, Science and Technology, framed the findings against Israel’s ongoing war and global antisemitism.

“Even in challenging years, when Israel is fighting a war on seven fronts, Israeli innovation proves its strength,” she said. “Our duty is to continue investing in human capital, research and development, and international cooperation so that Israel not only preserves its advantage but also leads global innovation in the coming decade.”

The IIA also pointed to historic deals that underscore the sector’s resilience, including Google’s $32 billion acquisition of cybersecurity giant Wiz in June, the largest in Israeli history. 2025 is now on track to be an all-time record year for high-tech exits.

Yet officials warned that heavy reliance on foreign capital—with local VC share dropping from 35% in early rounds to just 15% in later stages—leaves Israel strategically vulnerable.

“Israel’s high-tech sector is at an inflection point,” said IIA Chair Alon Stopel. “We see extraordinary resilience and recovery in later-stage fundraising. But we also see a slowdown in employment and entrepreneurship. To maintain our edge, we must act decisively, combining public policy with private investment, and deepening ties with allies.”

Despite the challenges, the report stressed that Israeli high-tech remains the backbone of the national economy, accounting for 57% of all exports and positioning the country as the Western world’s “Deep-Tech powerhouse.”

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