Opinion
Even bigger than the cyber revolution: How Israel is becoming a global defense-tech powerhouse
"Israel is going to see hundreds of billions of dollars in defense tech exits in the next few years that are going to displace existing primes and reshape the global defense landscape," writes Yitz Applbaum, chairman of Kinetica VC fund.
We know that Israel is the world’s most impressive cyber power. For decades, famed IDF units have produced some of the world’s best engineers and hackers. More than 500 cyber companies have been created by Israelis, generating nearly $100 billion in exits in the last five years.
For most nations, innovation is essential to the economy, global trade, and maintaining a competitive edge. For Israel, the story is more complicated. Israel understands that innovation is necessary because its national security and sovereignty depend on it. Innovation is embedded in Israeli society and culture, where risk-taking, rapid iteration, and a famously resilient mentality are highly valued.
On October 7, 2023, the Israeli public learned that its security is never guaranteed. Complacency and trust in current systems and technologies proved dangerously misplaced. Israelis have been fighting to correct this grave miscalculation since that day.
In the past two years, we have seen an unprecedented amount of talent, technology, and investment looking to solve security-related problems – far beyond cyber.
Today, Israelis understand that their security ultimately depends on themselves. And the problem doesn’t just exist on the battlefield; it threatens Jews across the world, in their hometowns and across the digital spectrum.
Since October 7, hundreds of defense-focused startups have surfaced in Tel Aviv. Soldiers and reservists on the battlefield are identifying gaps in military technology and operational capabilities, and more and more entrepreneurs are leaving their day jobs to join the effort and build new businesses. Thus, this unprecedented innovation is not just a reaction to October 7 and to the obvious threat to Israeli security. It’s also a part of a bigger societal phenomenon: soldiers come home from Gaza, reservists head to Syria, others to Lebanon. Battlefield experiences to enter the high-tech world of Tel Aviv almost immediately.
But it’s not just about soldiers becoming founders. Something else unique is happening. Our soldiers are becoming investors too. These investors aren’t just leveraging combat experience to identify technologies with real operational demand and turning lessons from the field into investment theses. They also deeply understand each founder who walks into the room. It’s not simply: “what unit?” but instead “what project with which commander?” Funds with retired IDF Generals who work as investors instantly have a deep understanding of every soldier’s experience and technical capabilities.
The combination of firsthand operational insight and capital is creating a uniquely effective innovation cycle. This marks a new phase in Israel’s innovation story: one where those who understand defense challenges most intimately are shaping the tools, systems, and strategies that not only define modern, but also future, warfare.
What we are witnessing is an innovation boom that will surpass even its renowned cyber achievements. Israel is going to see hundreds of billions of dollars in defense tech exits in the next few years that are going to displace existing primes and reshape the global defense landscape. We have seen Palantir and Anduril (very quickly) achieve this in the U.S.
Israel’s cyber boom helped transform Israel into Startup Nation, attracting billions of dollars in foreign investment, exports, and acquisitions. But defense tech startups will do something different. In the next few years, dual-use defense technologies will fuel Israel’s economy. These technologies simultaneously strengthen military readiness and provide commercial solutions for global markets.
Take, for example, Palantir’s initial counter-terrorism technologies, which now underpin hundreds of organizations’ operations, ranging from healthcare to transportation. Or, take Sentry, Anduril’s autonomous surveillance platforms, which supports U.S. Customs and Border Patrol agents on the southern border and monitors forests for early signs of wildfires.
Beyond strategic and security benefits, Israel’s defense tech surge represents an enormous economic opportunity. Dual-use technologies are driving innovation across multiple sectors: LimitlessCNC supports manufacturers in countless markets, while Particle’s accelerator technology enhances radiotherapy for cancer patients. Defense startups like these are poised to generate hundreds of billions in revenue and exits over the next decade. This influx of capital will create high-value jobs, attract foreign investment, and further cement Israel’s position as a global innovation powerhouse – effectively turning national security into a major engine of economic opportunity.
Yitz Applbaum is the chairman of Kinetica VC fund.
