Josh Wolfe, co-founder of US-based Lux Capital, highlighted Israel’s growing role in defense technology amid global tensions. He noted that innovations like the Iron Dome missile defense system have gained international recognition.

Lux Capital, which manages US$5 billion and focuses on deep tech, started investing in Israeli defense startups after October 2023.

The firm has backed Kela, founded by Israeli military veterans, which has raised US$100 million, as well as a stealth defense startup and Majestic Labs AI, led by Israeli AI expert Dr. Ofer Shacham.

Wolfe said Israeli tools are relevant beyond the region, including in conflicts involving Ukraine, Russia, China, and Taiwan.

US venture capital interest in Israeli defense tech has increased, with some investors seeking partnerships with Lux Capital. The firm also raised US$200 million specifically for defense, signaling strong demand from limited partners.

🔗 Source: Calcalist

🧠 Food for thought

1️⃣ Israel’s defense exports mirror broader global defense investment surge

Israel’s defense export growth—from $6.5 billion in 2016 to $11.3 billion in 2021—reflects a wider global trend as worldwide military expenditures reached $2.4 trillion in 2023 amid growing geopolitical tensions 12.

This expansion has been concentrated in high-tech systems like missiles (20% of exports), training services (15%), drones (9%), and electronic warfare systems (9%), positioning Israel as a leader in advanced defense technologies now attracting significant venture capital 1.

The Israeli defense ecosystem’s success stems from its unique structure, employing approximately 100,000 people with a strong R&D focus and leveraging direct combat experience from the IDF to refine technologies 1.

Major Israeli defense companies like Elbit Systems, IAI, and Rafael achieved combined revenues exceeding $13 billion in 2022, demonstrating the scale of the industry that attracts investors like Lux Capital 1.

This growth trajectory aligns with global defense tech investment patterns, where private capital investment reached $31 billion in 2024, with significant portions directed toward AI and autonomous systems that Israeli firms excel in developing 3.

2️⃣ Defense tech startups face unique challenges despite investment boom

While defense tech is attracting unprecedented venture capital—reaching $3 billion in 2024—startups in this sector face distinctive hurdles compared to traditional tech companies 4.

Many defense tech startups struggle with the “Valley of Death” between initial funding and commercialization, navigating complex government procurement processes that can delay revenue generation and strain investor patience 56.