"When nations go to war they need to invent new capabilities. That’s where startups come in"
Amikam Norkin, former Air Force commander and founding partner at Ace Capital Partners, was speaking at the Tech1 conference in Eilat.
"When nations go to war, they lay out their existing capabilities, and then they need to invent new ones. That’s where startups can collaborate with major players to build an edge," said Amikam Norkin, former commander of the Israeli Air Force and founding partner of Ace Capital Partners, in a conversation with Sophie Shulman of Calcalist about the future of defense at the Tech1 conference in Eilat.
Norkin has established a business platform that invests in aerospace and defense technologies. The fund is currently finalizing its third investment. So far, it has backed a company developing a unique space sensor and another with a patented hybrid propulsion system for UAVs.
What impact will current geopolitical developments, including Trump’s latest initiatives in the Middle East, have on Israel’s regional military edge?
"The focus on defense isn’t a passing trend. We’re seeing ongoing geopolitical instability - from tensions in the South China Sea, to the war in Ukraine, and now also in India. These global flashpoints are prompting governments to increase their defense budgets. As a result, investors are beginning to look at defense more seriously because they see growing potential there. I believe this will continue for at least the next decade. Current American policy is also pushing Europe to build independent defense capabilities, so the momentum will keep growing."
What about the regional picture, especially after October 7?
"Unfortunately, and I say this with sorrow, we experienced October 7. But strategically, I believe Israel’s position today is stronger than it was on October 6. We’re at a crossroads: if we make the right decisions now, Israel will be in a much better place ten years from now. These shifts take time, but we have excellent human capital, and I’m optimistic. I believe Trump’s visit to the region marked only the first stage of a broader reorganization in the Middle East, and I hope Israel will be more active in that process. We haven’t missed the train. Many countries in the region respect our security expertise and technological capabilities and are eager to cooperate."
You were one of the architects of the U.S.–Israel security aid agreement and reciprocal procurement. Some argue it’s no longer relevant. Is it still viable?
"In October 2016, Israel signed a ten-year security assistance agreement with the United States, which began in 2018 and runs through 2028. On the military side, we led this effort in the planning directorate, working closely with the National Security Council. The agreement is critically important, for Israel’s security and for its defense industry. It also marked the beginning of a shift: previously, about 26% of U.S. aid could be converted into shekels to fund purchases from Israeli companies. But under the new deal, that conversion is being phased out, and by 2028, it will no longer be allowed.
"Ideally, the Israeli government should have created a multi-year plan to support the local defense industry, especially since the ability to plan long-term is vital for both the military and industry. Unfortunately, that didn’t happen. Now, with the war underway, depleted stockpiles, and urgent technological needs, there’s an opportunity to inject significant funding into the industry, but much of it is simply patching gaps.
"We must begin talks with the Americans about what comes next. We should connect the strategic shifts in the Middle East with a renegotiated aid agreement—ideally one that includes additional components and extends beyond ten years. The current agreement is actually a win-win. It’s a U.S. government subsidy to American industry, and much of that technology sees its first battlefield use here in Israel. We serve as a live testing ground and allow the U.S. to scale back its regional presence. So there’s mutual benefit, and it’s essential we manage this process wisely."
Do startups today have a real chance of breaking through in the defense world?
"The integration of startups into defense is not just about seizing an opportunity. It’s a result of many converging trends. Countries have realized that relying solely on large defense contractors is slow and expensive. As defense budgets grow, they want faster response times - from operational need to deployment - and at lower cost."
But is that actually achievable in practice?
"The plug-in points between startups and defense ministries must also evolve. We’re seeing progress at the Directorate of Defense R&D and in defense procurement, both are increasingly engaging with younger companies. Large Israeli firms also need to improve how they work with startups, as some smaller companies still view these partnerships as threats, not opportunities. In parallel, venture capital is stepping in, and more governments are enabling startups to access contracts, become suppliers, and integrate into the broader ecosystem. All of these factors are reshaping the defense landscape."
For companies you’ve invested in, do you recommend starting in the Israeli market?
"Yes. One of the first questions an Israeli startup gets abroad is whether it works with the IDF. I encourage companies to sell to the IDF early on. It’s a stamp of operational credibility. The local market isn’t where you make massive profits, but it’s essential for learning the content, understanding the regulatory landscape, and preparing for export hurdles, especially around licensing and the Defense Export Control Agency."
Do political boycotts, like those targeting Elbit, pose a threat to startups selling to the IDF? Could it hurt their image?
"Sadly, over the past 18 months, we’ve lost legitimacy in parts of the world, and restoring it will require political effort. But many countries, both in the region and in Europe, know how to separate political rhetoric from defense procurement. In some cases, a statement is made in one language, and procurement proceeds in another."
Is this surge in defense activity just hype? Once the fighting dies down, won’t people decide all this innovation was overkill? Can VC funds really build a lasting new defense industry?
"It’s possible. When nations go to war, they lay out their existing capabilities, and then they need to invent new ones. That’s where startups can collaborate with major players to build an edge. Just look at the technology gap between Europe and regions like India or Pakistan. These aren’t differences you can bridge in a week or a year. Countries around the world are trying to leapfrog into the fifth generation of warfare. Israel’s Air Force already operates manned, unmanned, and autonomous platforms as part of a 5th-generation system. Most European air forces are two generations behind. So this transformation will take time."
And what role should government play?
"Government involvement is crucial. Just look at how much Trump advanced the U.S. defense industry last week alone. In the past, the Israeli government provided vital support for cyber, and it paid off. Today, we see limited investment in areas like AI and lasers. And we’re missing opportunities in space. If we don’t invest, we’ll fall behind. Space will increasingly become part of our daily lives, military and civilian alike. The state can play a major role through institutional investors or defense-linked funds. That way, it can support industry growth without shouldering the full cost directly."
