Opinion
When the VC narrative moves on, what happens to Israeli tech?
"A mature tech ecosystem makes room for multiple capital models to coexist: venture capital at the frontier, and other forms of disciplined capital that can capture the value left behind by fast-moving trends," writes Richard Norman, Managing Partner at SLS Partners.
It is officially prediction season in the Startup Nation.
As we kick off 2026, the ecosystem is participating in its favorite annual ritual: the consensus forecast. We participate in surveys, make predictions and collectively decide what's in and what’s out.
According to CTech’s current survey, the center of gravity is clear: AI infrastructure, cybersecurity, and defense are all hotter than a Tel Aviv summer. No great surprises there.
But by defining what is “trendy,” the market implicitly also defines what is not. And today, that binary framing, combined with the way capital is structured locally, is leaving meaningful value underexplored.
CTech’s own surveys illustrate how quickly those narratives rotate. In 2023, investors were explicit: founders building in generative tech, foodtech, or digital health had “completed half the journey” toward funding. Just ask the CEOs of foodtech or digital health startups how trendy they are feeling in 2026.
The point is not that those assessments were irrational or misguided. It is that trends move faster than most companies can. Some categories require longer development cycles, heavier capital investment, or more patient adoption curves. The underlying problems they address do not disappear simply because investor attention shifts elsewhere.
In other words, the fundamentals didn’t necessarily fail. The narrative moved on.
In larger, more diversified financial ecosystems, this kind of rotation may not strand companies entirely. When venture steps back, other forms of capital often step in: small-cap private equity, specialty finance, or growth-oriented investors with mandates focused on cash flows, assets, and durability rather than momentum. We see this in U.S. firms like Decathlon Capital, which provides non-dilutive growth capital based on revenue, or Enduring Ventures, which targets "VC Fallen Angels".
In Israel, the capital alternatives are far narrower.
Here, venture capital often acts as the judge, jury and executioner. The result is a long tail of companies that no longer fit the prevailing venture narrative, but have nonetheless built real businesses. These are companies with products in market, sticky customers, and measurable revenues, yet without a clear path to capital because they are now off trend.
They are not broken. They are simply out of fashion.
The solution is not to ask venture capital to change its mandate. Its role is to pursue the power law, hunt for the decacorns and return many multiples of its fund.
The opportunity lies elsewhere: in broadening the set of tools available to the ecosystem.
It means complementing venture capital with financing approaches that put greater emphasis on fundamentals such as cash generation, customer durability, and asset coverage than narrative momentum.
Viewed through this lens, the list of “untrendy” sectors looks less like a graveyard and more like an opportunity set. They need capital that is aligned with the more realistic outcomes of the business.
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- “AI doesn’t eliminate headcount growth; it reshapes its timing, purpose, and economics”
- “Israeli tech today represents the ability to build foundational companies that matter at global scale”
- “If productivity and abundance reach sufficient scale, society will gradually redefine why we work, what work means, and how value is created”
This ultimately requires a shift in perspective: a lack of current venture enthusiasm is not the same as a lack of value.
A mature tech ecosystem makes room for multiple capital models to coexist: venture capital at the frontier, and other forms of disciplined capital that can capture the value left behind by fast-moving trends.
As we move through 2026, the most sophisticated participants in Israeli tech will not only be those competing for allocation in oversubscribed AI deals. They will also be the ones with the patience and discipline to look where attention has paused, and to recognize durable businesses that can continue to flourish, albeit outside the spotlight.
Richard Norman is the Managing Partner at SLS Partners.
