Half of Israel’s new startups now incorporate in the US
Only 52% of new companies registered locally in 2025, as judicial upheaval, war and sentiment reshape founders’ decisions.
2025 was the year of the Israeli exit, but not only in the positive sense of the term.
Only about half of the new startups founded in 2025 were registered in Israel, while the other half were incorporated in the United States, according to data obtained by Calcalist.
The question of whether to register a startup in Israel or in the U.S. has long been debated in the local high-tech industry. However, the data revealed here shows a clear and worrying trend: a sharp decline in the share of startups choosing to incorporate in Israel over the past three years.
1 View gallery
Wiz team in Times Square.
(Photo: Brandon Luckain, Lucky Shot Media - courtesy of Wiz)
Between 2018 and 2022, the overwhelming majority of new startups, around 75% to 80%, were registered in Israel, with only about 20% incorporating in the U.S. Since early 2023, however, following the judicial overhaul crisis and the outbreak of war, that balance has shifted dramatically.
According to data compiled by Meitar Law Firm and S Cube, a firm owned by IBI, in 2023 the share of startups incorporated in Israel fell to 65%, down from 74% in 2022. The war year of 2024 marked the low point, with only 50% of startups registering in Israel. Toward the end of 2025, a modest recovery began, bringing the figure to 52% by year’s end. The dataset represents a broad and representative sample of Israeli high-tech, collected by two of the largest and most influential players in their respective fields.
The declining rate of incorporation in Israel is troubling for two main reasons.
First, registering a startup in Israel offers clear tax advantages over incorporating in the U.S. at every stage of a company’s life. These include tax incentives for foreign investors, favorable taxation of employee stock options, with tax generally paid only upon exercise, often at a reduced capital-gains rate of 25%, and lower effective corporate tax rates, as large technology companies typically do not pay the full statutory 23%. Between 2023 and 2025, there was no deterioration in Israel’s tax regime relative to the U.S. that could explain the shift in incorporation decisions. Choosing to forgo these benefits therefore signals a deeper erosion of confidence in Israel’s future.
The second concern relates to the surge in exits, sales of Israeli-founded companies to foreign corporations and investment funds. The location of incorporation has a decisive impact on the state’s tax revenues from such deals. When a startup is not registered in Israel, the state loses substantial income, a pattern evident in nearly all of the major transactions of the past year, including Wiz, CyberArk and Armis.
In 2025, exits, both large and small, reached a record total of nearly $90 billion, underscoring the long-term fiscal risk facing the state. While the sale of Wiz to Google for $32 billion is expected to inject an estimated 10 billion shekels (approximately $3.2 billion) into the public coffers, according to the Ministry of Finance, the figure would have been far higher had the company been registered in Israel.
In Wiz’s case, the expected tax revenue will stem almost entirely from personal taxation of the four founders, Assaf Rappaport, Roy Reznik, Ami Luttwak and Yinon Costica, as well as from the taxation of roughly half of the company’s employees who reside in Israel. There is currently discussion about whether the Tax Authority can impose additional taxes related to Wiz’s intellectual property, given that most of its development took place in Israel, but there is no certainty that such an effort will succeed. Had Wiz been incorporated locally, the state could have collected tens of billions of shekels more, a significant sum, given that even the projected 10 billion shekels amounts to roughly half a percentage point of GDP.
A similar, though smaller-scale, outcome is expected from the sale of Armis to ServiceNow for $7.75 billion. Here too, most of the state’s revenue will come from taxing the company’s founders, Yevgeny Dibrov and Nadir Izrael. CyberArk, which was sold to Palo Alto Networks for $25 billion, is also incorporated in Israel, with its intellectual property also registered in the country. Unlike Wiz, whose founders still hold significant stakes, CyberArk’s shares are now largely held by U.S. institutional investors.
Wiz and Armis are each incorporated in the U.S. for sector-specific and investor-driven reasons, particularly given the dominance of American capital in the cybersecurity sector. In CyberArk’s case, which was founded decades ago, Israel’s tax framework for high-tech had not yet been adapted to the industry; the current advantages only emerged after the global financial crisis. From around 2010 until early 2023, most startups once again chose to incorporate in Israel, including companies such as Wix, monday.com, Riskified, Lightricks, HiBob and AppFlyer.
“2025 was indeed a year of recovery for Israeli high-tech across almost every metric,” says Dudi Fruchtman, a partner in Meitar’s high-tech department who led the research. “But a warning light has also turned on: a sharp rise in the number of startups choosing to incorporate outside Israel. This is a strategic challenge that requires government action if high-tech is to remain a central growth engine for the economy. The year proved that foreign capital still believes in Israeli technology. Now the challenge is to ensure it also stays here.”
Gidi Shalom Bendor, founder and CEO of S Cube, echoes the concern. “The data from the past three years clearly reflects damage to the ‘Israel’ brand,” he says. “Entrepreneurs don’t want to make things harder for themselves. In 2020, being an Israeli startup was an advantage; in 2023 and 2024, much less so. Turning this around will be difficult, and the consequences will be felt for years.”
According to Shalom Bendor, even though he, law firms and accountants generally recommend incorporation decisions based on economic considerations, entrepreneurs increasingly hear from peers that raising capital is easier today if a company is registered in the U.S.
The incorporation debate intensified after January 2023, following Justice Minister Yariv Levin’s announcement of the judicial overhaul and the mass protests that followed, in which high-tech companies played a prominent role. At the time, discussion emerged around proactively moving intellectual property abroad and effectively transforming Israeli-registered companies into foreign ones. According to Fruchtman, this scenario largely failed to materialize due to high costs and bureaucratic complexity.
Instead, new startups simply stopped incorporating in Israel. The decision is typically made in a company’s first year, when it begins engaging with investors, suppliers and customers. “Ultimately, the decision combines objective and subjective factors,” Fruchtman explains. “Objectively, it depends on where the founders live, who the investors are, and the company’s field of activity. Subjectively, it’s about the mood of the ecosystem, media headlines, conversations in WhatsApp groups, and general sentiment.”
While the objective factors have remained largely unchanged over the past three years, the subjective ones have shifted dramatically. “In the classic scenario of two or three Israeli founders, tax considerations still clearly favor incorporating in Israel with a U.S. subsidiary,” Fruchtman says. “That remains the optimal structure. But since 2023, we’ve seen a herd effect driven by fear about the country’s future. In most cases, our recommendation has not changed. Only rarely have investors explicitly demanded U.S. incorporation as a condition for investment.”
After choosing where to incorporate, founders must also decide where to register intellectual property. In many cases, even when the parent company is registered in the U.S., the IP remains in Israel because that is where development and management are based. While IP registered in Israel can still be taxed locally, the state’s revenues remain significantly lower than if the company itself were incorporated domestically. Unlike incorporation, IP registration is not a binary decision, and in some cases the Israeli Tax Authority seeks to levy taxes by proving that the bulk of development activity takes place in Israel.
