VC Survey 2026
“The recovery of the Israeli IPO market in 2026 is fundamentally tied to the stabilization of US capital markets”
UpWest Partner Lia Cromwell joins CTech as part of the VC Survey 2026: The Next Leap to offer her predictions for the investment landscape, from the anticipated thaw of the IPO window for Israeli startups to the latent potential of Vertical AI.
“The recovery of the Israeli IPO market in 2026 is fundamentally tied to the stabilization of US capital markets,” says Lia Cromwell, Partner at UpWest. She adds: “The 2026 liquidity environment will be a mirror of the US: a bifurcated market where top-tier assets go public, while the rest of the ecosystem finds liquidity through disciplined M&A and sophisticated private secondaries.”
According to Cromwell, while the bar for an IPO remains high compared to the 2021 peak, a growing backlog of mature Israeli companies with disciplined balance sheets are finally prepared to meet the market’s rigorous new requirements.
Following the turbulence of recent years and the stabilization of 2025, the Israeli tech ecosystem is entering a new era: The Next Leap. Cromwell joined CTech to share insights for its VC Survey 2026, which invites prominent investors to discuss the topics, trends, and “leaps” expected in the year ahead.
Cromwell identifies a fundamental transition toward "Physical AI" within the dual-use sector, as software progresses from "simply processing information to intelligence that interacts with the tangible world." Further, she predicts healthcare to be "the breakout vertical for trust in 2026," primed to benefit from AI agents gaining autonomy. Ultimately, says Cromwell, "the most undervalued opportunity for 2026 isn't a specific sector – it’s the broad, strategic shift toward Vertical AI."
You can read the entire interview below:
Fund ID
Name of Fund: UpWest
Total Assets Under Management (AUM): $140m
Partners/Managers: Shuly Galili, Gil Ben-Artzy, Lia Cromwell
Notable Portfolio Companies (Active): Zenity, Darwin, Stampli, Honeybook, Imubit, BeeHero, Canopy
Notable Exits: SentinelOne, CyberX, Waycare, Livble
The Liquidity Leap: After a period defined by cash preservation, will 2026 see the reopening of the IPO window for Israeli tech, or will M&A remain the sole viable liquidity event?
The recovery of the Israeli IPO market in 2026 is fundamentally tied to the stabilization of US capital markets; historical data shows a near-total correlation between Israeli exit volumes and Nasdaq/NYSE performance. Following the initial thaw of 2025, we anticipate a broader normalization of public listings in 2026, provided that late-stage valuations remain anchored to the rigorous profitability and EBITDA margins now demanded by institutional investors. The hurdle for an IPO remains high compared to the 2021 peak, but the current backlog of mature Israeli companies with disciplined balance sheets suggests that more teams are finally prepared to meet these requirements.
However, the reopening of the IPO window won’t sideline M&A or secondary transactions; these have evolved into permanent, strategic pillars of the liquidity landscape. Just as in the US, many high-growth companies are choosing to defer their public debuts to further optimize unit economics, utilizing the secondary market as a necessary release valve for shareholder liquidity. Meanwhile, M&A will remain a dominant force as strategic consolidators and private equity firms move aggressively to integrate AI and cybersecurity assets. Ultimately, the 2026 liquidity environment will be a mirror of the US: a bifurcated market where top-tier assets go public, while the rest of the ecosystem finds liquidity through disciplined M&A and sophisticated private secondaries.
The Valuation Leap: Moving past the market correction, what is the single most critical metric (e.g. EBITDA, NRR) that will drive premium valuations in 2026?
The early-stage funding market in Israel in 2026 is clearly bifurcated between cybersecurity and every other sector. We are seeing "obvious" founding teams in cyber – primarily second-time founders or subject matter experts from elite units – raising initial rounds at some of the highest average valuations the industry has ever seen. Conversely, first-time founders in other categories face a much more demanding environment where they must prove significantly more to secure meaningful capital. This discrepancy has fueled a resurgence of pre-seed rounds. We don't view this as a negative reflection on a team’s quality, but rather a structural reality of the current valuation tailwinds concentrated in cyber.
At UpWest, we actively invest across all domains and see the most compelling opportunities in teams chasing "non-obvious" market gaps. These founders will likely face a higher bar to raise their Series A, but they are often attacking domains where they can create a more meaningful wedge into early customer workflows. Our advice to founders across all domains is to focus on tangible market results over sector-specific hype. While hype can inflate perceived value temporarily, real traction – measurable adoption, recurring revenue, and expanding customer engagement – is what ultimately sustains a premium valuation. Delivering these results is the only reliable way to move past market corrections and build long-term investor confidence.
The Agentic Leap: As we transition from 'Copilots' to autonomous 'Agents,' which specific vertical will be the first to fully trust AI with independent decision-making?
The transition from Copilots to autonomous agents is the ultimate test of vertical conviction. While dev tools and cyber are the "obvious" first movers because they operate in machine-to-machine environments, I believe Healthcare will be the breakout vertical for trust in 2026.
The US healthcare system is arguably the most inefficient market in the country, bogged down by administrative waste and a chronic labor shortage that has reached a breaking point. When the status quo is this broken, fundamental change isn't just a "nice to have," it's inevitable. We are seeing trust being granted to AI agents here because the cost of human-driven inefficiency has finally surpassed the perceived risk of automation.
Historically, Healthcare AI was stuck in "Copilot" mode due to regulatory and clinical liability. But we are moving past that as founders build vertical-specific agents with "compliance-by-design." These aren't general-purpose bots; they are systems with hard-coded clinical guardrails and transparent audit trails that solve the "last mile" of high-volume workflows like triage, billing, and patient monitoring. 2026 will prove that in the most inefficient markets, the winners won’t be the ones building the broadest tools, but the ones building the most specialized agents that can be trusted to own an entire, regulated process from start to finish.
The Dual-Use Leap: Israel has mastered Defense Tech. Which civilian industry (e.g., Construction, Agri, Logistics) will see the biggest disruption from adapting these battle-tested technologies?
In 2026, the real story of Israeli dual-use tech is the rise of Physical AI. Israel has spent decades mastering the intersection of high-fidelity sensing, autonomous navigation, and edge computing in the most unforgiving environments. We are now seeing that expertise move into the last mile of massive, inefficient US industries like agriculture, advanced manufacturing, and data centers, where the status quo is increasingly challenged by labor and capacity shortages along with rising operational costs.
Physical AI represents the transition from software that simply processes information to intelligence that interacts with the tangible world. We see the most compelling opportunities in founders who take battle-tested computer vision and robotics and apply them to the biological and industrial systems that underpin the economy. In Agriculture, this means shifting from passive data monitoring to the autonomous management of biological assets. In Manufacturing, it’s about deploying the autonomous backbone needed to handle complex industrial workflows with minimal human intervention.
At UpWest, we’ve always been bullish on "non-obvious" vertical opportunities where the pain of operational waste is highest. For these Physical AI founders, the US is the primary market from day zero. The winners in 2026 won’t be the ones building incremental features, but the ones building the autonomous infrastructure that makes US production and food security more efficient and predictable.
The Contrarian Leap: What is one sector or trend currently ignored by the herd that you believe represents the most undervalued opportunity for the coming year?
The most undervalued opportunity for 2026 isn't a specific sector – it’s the broad, strategic shift toward Vertical AI. Today, there is a significant amount of readily accessible capital for founders tackling "obvious" problems in cybersecurity or infrastructure, where the playbook is established and the path to exit is well-defined. However, the real alpha lies in the "non-obvious" verticals. It takes a unique level of conviction for a team to bypass those highly-capitalized sectors and instead obsess over the fragmented, specialized workflows of industries like logistics, healthcare, or construction.
Building in Vertical AI is a contrarian bet because it requires more than just technical prowess; it requires deep domain empathy and the patience to navigate industries that don't always move at "software speed." While these spaces may attract less immediate attention than horizontal AI, that lack of overcrowding is exactly what creates massive outcomes. These founders aren't building incremental features; they are building the core operating systems for the world’s most essential industries.
In 2026, the most successful founders will be those who stay vertical when the rest of the market is going horizontal. These teams may face a steeper climb to raise their next round, but by owning a critical industry workflow, they are building something with far more long-term terminal value.
Finally, what are 2-3 startups that, in your opinion, are likely to make a leap forward in 2026?
1. Darwin (UpWest portfolio) – Darwin is poised for a breakout 2026 as the public sector reaches a critical tipping point in AI adoption. While private enterprises have moved quickly, state and local governments are now under immense pressure to implement AI responsibly while navigating complex regulatory landscapes. Darwin’s "AI Control Center" addresses this by offering a centralized hub for policy enforcement, risk management, and compliance tailored for government workflows. As federal and state-level AI mandates become more stringent in 2026, Darwin’s ability to eliminate "Shadow AI" and provide transparent, auditable governance will make it essential infrastructure for the next generation of civic tech. We are proud to have led the company’s Seed round and to have continued backing the team in their recent $15m Series A led by Insight Partners. Fresh off this new funding round, they have big things lined up for this coming year.
2. Zenity (UpWest portfolio) – Zenity is the frontrunner in the emerging category of AI Security Posture Management (AI-SPM), positioning it for significant growth as "Agentic AI" becomes the enterprise standard. As companies shift from simple chatbots to autonomous agents that can take actions and access sensitive data, the attack surface expands exponentially. Zenity provides the industry’s first security platform purpose-built to govern these agents across SaaS, cloud, and endpoint environments. With a focus on "intent-breaking" detection – stopping malicious actions even when the prompt looks harmless – Zenity is the key enabler for CIOs who want to unlock AI productivity without sacrificing security.
3. Unframe AI – Unframe AI is positioned for a breakout 2026 as the enterprise market shifts from generic LLM experimentation to high-stakes, production-grade applications. While many startups focus on thin "wrappers," Unframe provides a robust infrastructure layer that solves the specific engineering challenges of deploying AI – such as data ingestion, context management, and integration with legacy systems. By offering pre-built modules for complex business logic, they allow enterprises to bypass months of development time and avoid the common pitfalls of self-built AI architecture. As 2026 becomes the year of "ROI or bust" for corporate AI budgets, Unframe’s focus on speed-to-production and technical reliability makes it a critical partner for the global workforce.
