Israel’s startups see early-stage valuations soar amid AI surge
Series A-D rounds rise 29-43% as investors concentrate on high-growth tech companies.
Israel’s high-tech sector is navigating a turning point, according to a new report by Vintage Investment Partners, presented by co-managing partner Asaf Horesh, highlighting trends in venture capital funding, valuations, and mergers and acquisitions over the past year. The analysis paints a picture of an ecosystem increasingly defined by concentrated capital flows, soaring valuations, and strong investor appetite for AI and cybersecurity startups.
The report, unveiled at Israel’s eighth annual “Trends & Forecasts” conference, convened by pre-Seed fund Fusion and law firm Pearl Cohen, finds that venture capital investment is consolidating around a smaller number of funds and companies. In the U.S., fundraising activity has slowed markedly: $61 billion is expected to be raised by 376 funds in 2025, down from 832 funds last year. The median time to close a fund has lengthened to 18 months, compared with 15.8 months previously.
Despite the slowdown in the number of funds, total capital deployed in startups remains substantial. U.S. investors directed more than $250 billion to startups during the first three quarters of 2025, with roughly 58% going to AI-focused companies. Furthermore, about half of all investments were concentrated in just 1% of startups, mostly growth-stage AI firms.
Israel, however, presents a distinct pattern. The country’s dense network of repeat entrepreneurs and intense competition among investors has pushed up valuations even at early stages. Between 2023 and 2025, average company valuations in Israel rose by 43% in Series A rounds, 35% in Series B, 29% in Series C, and 36% in Series D. “Global investment behavior around AI closely resembles what we saw in 2021-2022, but this can be explained by the unprecedented technological leap humanity is experiencing, accompanied by rapid adoption and significant value creation,” Horesh said.
In sectoral terms, the report identifies cybersecurity and artificial intelligence as the dominant drivers of investment activity, with nearly all capital flows focused on these areas. Quantum technologies ranked third, signaling growing interest, while fintech has declined in relative priority.
The report also highlights a divergence between Israel and global M&A trends. While U.S. and European markets continue to show only modest recovery, Israel is on track for a record year. Excluding the landmark Wiz acquisition, deal volumes and pace in 2025 already position the country for a record-setting year.
A pre-conference survey conducted by Fusion of more than 200 investors highlighted the industry’s evolving challenges and priorities. Intensifying competition for investments in the hottest sectors topped the list, cited by 29% of respondents. The ability of local funds to compete with foreign investors emerged as a growing concern, up sharply from 10% last year to 23% this year. Raising new funds was ranked third, though the share of respondents identifying it as a key challenge dropped from 38% to 20%.
Investors also pointed to the sectors expected to dominate the year ahead. Nearly all respondents (98%) named cybersecurity as a leading focus, followed closely by artificial intelligence at 96%. Quantum technologies ranked third at 23%, replacing fintech, which fell to fourth place with 20%.
Guy Katsovich, Fusion’s Co-Founder, noted the improving mood: “We are seeing a reawakening in the formation of new funds, something we haven’t seen in quite some time, alongside a renewed entry of non-U.S. foreign investors whose investments are not driven by Zionist considerations.”
Adv. Guy Lachmann, Senior Partner at Pearl Cohen, added that the market appears poised for a post-holiday surge in activity. “There is currently an abundance of attractive acquisition targets that, after about two challenging years, have transitioned to lean and efficient operating models. Many are under pressure to sell, in part because existing investors have pulled back or lack the resources to continue investing.”
