Israeli tech continues to show resilience despite contending with a challenging two-year war period, as startup fundraising continues to recover and 2025 is poised to be a record year for tech exits.

At the same time, there are alarming indicators that call into question whether the local tech sector will be able to maintain its status as the largest and fastest growth engine in the country’s economy, the Israel Innovation Authority cautioned in a new report on Wednesday.

After a decade of accelerated growth, the tech sector faces stagnation in employment growth and output, as the recovery in startup investment has not been translated into increased recruitment. In addition, the tech ecosystem suffers from a decline in the formation of new startups and a sharp drop in fundraising by Israeli venture capital funds, warned the 2025 High-Tech report by the Israel Innovation Authority, which is in charge of directing the nation’s tech policies.

“2025 reveals the dual story of Israeli high-tech,” said Israel Innovation Authority CEO Dror Bin. “Israel is consolidating its position as a global Deep-Tech center, second only to the US in the Western world, with more than 1,500 active companies and a share exceeding one-third of all capital invested in local High-Tech.”

“However, high-tech output has been stagnant; the number of R&D employees is shrinking; new venture creation is lower than in the previous decade; and VC fundraising is........

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