TLDR: Israeli venture capital funds have experienced a significant downturn in fundraising, reaching a decade low in the first half of 2025 with only $260 million raised. This contrasts with a robust overall investment landscape for Israeli startups, which secured $9.3 billion in the same period, largely driven by later-stage deals and a strong focus on AI companies. The trend reflects a global ‘VC compression’ where capital is consolidating, making it challenging for smaller funds and early-stage startups, while AI-focused companies continue to attract substantial investment.
Israel’s venture capital funds are navigating a challenging period, with fundraising plummeting to a new low in the first half of 2025. Data indicates that only $260 million was raised by 12 Israeli venture capital funds during this period, a stark contrast to the $2.2 billion raised in 2023. If this trend persists, total fundraising for 2025 is projected to be 40% lower than the $1.27 billion secured in 2024, which itself was the lowest in a decade. The most optimistic estimates place the total fundraising for 2025 at a maximum of $350 million. This represents a dramatic decline even when compared to more modest years like 2016, when Israeli funds raised $1.98 billion, let alone the boom years of 2021 and 2022, which saw over $6 billion annually.
Kerem Nevo, head of the Israel Innovation Authority’s growth division, commented on the situation, stating, “Data for the first half of 2025 indicate a sharp decline in the amount of fundraising by venture capital funds in Israel, from $2.2 billion in 2023 to about $260 million this year. This is a global trend of declining fundraising and consolidation, which is particularly challenging for small and medium-sized funds, and raises concerns about the ability of startups in diverse fields to raise the capital they need.”
Despite the struggles of VC funds, the broader Israeli startup ecosystem shows remarkable resilience. Private capital investment in Israeli startups reached $9.3 billion in the first half of 2025, marking the strongest half-year performance since the 2021 boom. This represents a 54% increase from the second half of 2024, signaling a clear vote of confidence from global investors despite regional instability. The first two months of 2025 alone saw Israeli startups raise $1.25 billion, a significant jump from $800 million in the same period of 2024.
This dynamic reflects a ‘VC compression’ trend, where capital is increasingly concentrated in fewer hands and flowing towards fewer, often later-stage, companies. The first half of 2025 saw 32 mega rounds (over $50 million), up from 20 in the previous half. Enterprise software led with $3.19 billion, followed by cybersecurity ($1.98 billion) and fintech ($751 million). While health tech had the most deals (69), its funding was more modest at $623 million.
AI continues to be a dominant force in the investment landscape. “Promising startups that were founded only six months to a year ago, especially those located at the core of AI, manage to raise funds relatively easily,” noted Pasca-Raz. Globally, AI startups captured 53% of all venture capital dollars in the first half of 2025. In the US, this figure rose to 64%, with a third of that capital going to just five companies, including OpenAI ($40 billion) and Scale AI ($14.3 billion). Notable Israeli AI companies like Augury (industrial AI) and Voyantis (predictive AI) also secured significant funding rounds of $75 million and $41 million, respectively. Safe Superintelligence (SSI) closed a record-breaking $2 billion Series B round.
The concentration of capital has created a challenging environment for early-stage startups. There’s an observed ‘Series A crunch,’ with only 15.5% of companies that raised seed funding in Q1/Q2 2023 successfully securing a Series A two years later. Pre-seed rounds are experiencing lower valuations for the first time in nearly a decade, and investors are becoming more selective, demanding stronger validation signals like proof of concept or initial pilots. The Simple Agreement for Future Equity (SAFE) has become the standard investment vehicle for pre-seed rounds.
Mergers and acquisitions also saw a high, totaling $39.2 billion, significantly boosted by Google’s $32 billion acquisition of Wiz. Even excluding this mega-deal, M&A activity remained strong at $7.2 billion. Public markets are also thawing, with IPO activity surging to $1.6 billion across 13 deals, including eToro’s Nasdaq debut, which saw a 30% jump on its first day. International investors played a crucial role, accounting for 62% of active investors in H1 2025.
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Yuval Horn, Chair of the technology and life sciences practice at GNY, summarized the complex situation: “The Investor Report reveals a complex dynamic in the Israeli venture capital market: fundraising has hit a decade low, yet actual investment volumes have increased compared to 2023, despite the ongoing war.” Avi Hasson, CEO of Startup Nation Central, expressed optimism, stating, “Even during the escalation with Iran, we recorded 31 funding rounds. Founders are building. Investors are backing them. Israeli tech is not just resilient—it’s resurging.”
