Key takeaways
- Defence tech is becoming a major venture category, driven by geopolitical urgency, AI, autonomy and the need to rebuild Western manufacturing capacity.
- Israel has the ingredients to repeat its cybersecurity success: operational insight, specialist talent, rapid feedback loops and deep expertise across hardware and software.
- Los Angeles could become an important bridge into the US market, connecting Israeli founders with defence investors, customers, manufacturing partners and aerospace talent.
Defence tech has moved from the margins of venture capital to one of its fastest-growing categories. PitchBook recorded $49.9 billion invested across 966 defence-tech deals in 2025, although its broad definition includes aerospace and many dual-use technologies. Using a narrower set of military, national-security and law-enforcement companies, Crunchbase counted $9.6 billion in 2025—and more than $14.6 billion in just the first five months of 2026. Whatever definition you choose, the direction is clear: private capital is flowing into defence technology at record levels.
Israel is participating disproportionately in this shift. Israeli defence-tech startups working with the Ministry of Defence reportedly raised nearly $3 billion in the first half of 2026, three times the amount raised during all of 2025. Defence-tech and dual-use companies accounted for almost 30% of the $8.4 billion invested in Israeli high-tech during the period, while approximately 800 startups are now fulfilling direct procurement orders for the Ministry of Defence.
These numbers came to mind during my visit to Los Angeles this week, where I met several investors who have backed Israeli startups or are actively looking to do so. While LA is still best known for Hollywood, gaming and consumer technology, another ecosystem has been building—quite literally—in the industrial corridors stretching from El Segundo and Hawthorne to Long Beach and Orange County.
Southern California is becoming one of the world’s most important hubs for defence, aerospace and advanced manufacturing. SpaceX is headquartered in Hawthorne. Anduril was founded in Orange County and is significantly expanding its Southern California presence. Around them is a growing constellation of companies developing autonomous systems, satellites, drones, sensors, advanced materials and new manufacturing technologies.
You can feel that defence tech is no longer a niche category in LA. It is becoming part of the region’s identity and, increasingly, part of the conversation among its investors. I believe Israel is undergoing a similar shift.
Defence tech is commercialised deep tech
What makes defence tech particularly interesting is that it is often commercialised deep tech: difficult, defensible technology applied to an identifiable problem, with a customer that has both an urgent need and a budget.
Deep-tech startups have traditionally faced a difficult commercialisation challenge. They may possess impressive intellectual property and potentially transformative technology, but it can take years to identify a customer willing to fund its deployment. Defence can change that equation because the problems are visible, the consequences of failure are tangible and the need for better solutions is immediate.
Modern defence technology combines many of the disciplines in which Israel has longstanding expertise: artificial intelligence, computer vision, autonomy, robotics, cybersecurity, electronic warfare, semiconductors, edge computing, sensors, communications, space technology and advanced manufacturing.
These are not isolated military technologies. Many have meaningful applications in logistics, industrial automation, transportation, emergency response, agriculture, energy and the protection of critical infrastructure. The most interesting defence-tech companies are not necessarily traditional weapons manufacturers. They are technology companies solving hard problems in autonomy, resilience, sensing, coordination and production. Defence may be their first or most demanding customer, but it does not always have to be their only market.
Five frontiers shaping the market
Bessemer Venture Partners recently published its 2026 defence technology roadmap, arguing that defence technology has advanced more in the past 24 months than during the preceding three decades. Bessemer identifies five areas likely to define the next generation of national-security innovation: autonomy, AI-powered defence workflows, advanced manufacturing, resilient networks, and energy and materials independence.
The first frontier is autonomy moving from experimentation into deployment. The opportunity is no longer limited to building an individual drone or autonomous vehicle. It is expanding into coordinating large numbers of heterogeneous systems across air, land, sea and space, including the command-and-control infrastructure required to manage them.
The second is AI entering both mission-critical and administrative defence workflows. Defence organisations deal with enormous quantities of unstructured information, complex planning processes and fragmented legacy systems. As AI becomes more reliable and deployable in secure, air-gapped or disconnected environments, it can improve intelligence analysis, mission planning, procurement, maintenance and logistics.
The third is advanced manufacturing. Recent conflicts have exposed an uncomfortable reality: Western countries are not equipped to manufacture many critical systems cheaply, quickly or at sufficient volume. The next generation of defence companies will need to innovate in production as much as in product design. A better interceptor is of limited value if it costs several million dollars to stop a drone costing a few thousand, or if it cannot be manufactured quickly enough to replace depleted inventory.
The fourth is resilient communication and navigation. GPS, conventional communications and centralised networks are vulnerable to jamming, spoofing and attack. The modern battlefield increasingly requires mesh networks, self-healing communications and alternative positioning technologies capable of operating in contested environments.
The fifth is energy and materials independence. Defence capability ultimately depends on access to energy, critical minerals, batteries, semiconductors and secure supply chains. Technological sovereignty is not just about owning the software or intellectual property; it is also about retaining the ability to manufacture the underlying systems.
These categories closely match areas in which Israeli founders already possess relevant technical and operational experience.
Why Israel could repeat its cyber success
Israel’s defence industry is not new. Rafael, Elbit Systems and Israel Aerospace Industries have spent decades building globally recognised capabilities. What is changing is the emergence of a much larger startup layer around these established companies.
The shift is visible in an unlikely place: Israel’s office market. According to a recent CTech report, office leasing by Israeli defence and security companies increased by 32% in the first half of 2026, reaching more than 140,000 square metres. Companies in the sector were seeking a further 145,000 square metres, representing roughly 30% of all active demand in Israel’s office market.
Real estate can be a useful lagging indicator of what is happening underneath the funding announcements. Defence companies need laboratories, clean rooms, testing facilities, secure infrastructure and physical production space. They also tend to have less flexibility to embrace remote work. Their expansion into Tel Aviv and other technology centres suggests that they are increasingly competing directly with software companies for engineering talent.
There are structural reasons why Israel should be strong in this category. The country has dense networks connecting military units, universities, defence contractors, entrepreneurs and investors. Founders frequently encounter operational problems before they become visible to the wider commercial market. They are accustomed to building under constraints, combining hardware and software and deploying products in situations where failure has real consequences.
Most importantly, Israeli founders can benefit from unusually fast feedback loops. Technology can be developed, tested and improved through close interaction with sophisticated users. This resembles Israel’s original advantage in cybersecurity: the best founders do not begin with an abstract market thesis. They begin with intimate knowledge of the problem.
Cybersecurity did not become an Israeli specialty because Israel simply had good engineers. It became a repeatable company-building engine because founders emerged with relevant experience, found early customers, attracted specialist investors, successfully entered the US market and then trained or financed the next generation of founders. Defence tech may now be developing the same flywheel.
The LA–Israel defence-tech bridge
This is where Los Angeles becomes particularly relevant. Israel may be exceptionally good at producing technologies and technical founders, but Israeli defence startups still require access to the US market. They need American customers, manufacturing partners, regulatory expertise, specialist capital and people who understand how to navigate the US procurement system.
Southern California offers much of that infrastructure in one place. Its advantage extends beyond SpaceX and Anduril. The region has a deep aerospace heritage, experienced engineering talent, industrial capacity, major research universities and a growing community of founders trained inside the new generation of defence and space companies. In fiscal 2023 alone, Los Angeles County received approximately $12 billion in defence contracts.
The ecosystem is also producing important second-order effects. Employees leave successful companies to launch new startups. Investors develop a better understanding of government procurement and hardware risk. Suppliers become accustomed to working with fast-growing companies rather than only established defence primes. Talent, capital, customers and manufacturing knowledge begin to reinforce one another.
For Israeli founders, LA can therefore become more than a source of investment. It can be a landing point for entering the American defence ecosystem, developing local partnerships and eventually establishing manufacturing or commercial operations in the US.
For LA investors, Israel offers something equally valuable: a concentrated source of founders with operational experience, distinctive technical capabilities and products developed in response to real-world needs. The fit is natural, but stronger bridges will be required to turn that potential into repeatable outcomes.
This is not simply cyber with hardware
There are important differences between defence tech and Israel’s cyber boom. A cybersecurity startup can often sell its first product to a commercial enterprise, improve it remotely and expand through a relatively conventional software sales model. Defence companies face longer procurement cycles, security restrictions, export controls and considerable customer concentration.
Hardware creates additional risk. Manufacturing delays cannot be fixed with another software release. Scaling production requires working capital, supply-chain expertise, quality assurance, facilities and specialised personnel. A successful demonstration proves that a technology can work; it does not prove that the company can deliver hundreds or thousands of units reliably, safely and at an acceptable cost.
Capital is also becoming concentrated in a relatively small number of large rounds. Record investment totals do not necessarily mean it has become easy for a new defence startup to raise its first institutional round. As we have seen elsewhere in venture capital, headline funding can obscure a much more selective early-stage environment.
Investors must also confront the regulatory and ethical consequences of the sector. “Dual use” should not become a convenient label attached to every technology with a potential military customer. Founders and investors need clear policies regarding end users, permitted applications, exports and governance. These questions cannot be postponed until after the company achieves product-market fit.
Israel’s next global category
Cybersecurity emerged from a combination of talent, experience, networks, customer access and repeated success. The same ingredients are increasingly present in defence technology, amplified by geopolitical urgency, the progress of AI and autonomy, growing defence budgets and a procurement system becoming somewhat more open to startups.
Israel is already one of the world’s leading centres for defence innovation. The question is whether its next generation of founders can turn that capability into independent, globally significant technology companies.
My conversations in Los Angeles this week reinforced my belief that this is bigger than a local Israeli investment trend. LA and Israel occupy complementary positions in the same emerging ecosystem. One offers access to the world’s largest defence market, specialist capital and a rapidly growing industrial base; the other offers an unusually concentrated supply of technology, talent and operational insight.
If the right bridges are built, defence tech could become for Israel what cybersecurity became over the past two decades: not simply a successful sector, but a durable global advantage.
He is a former General Partner at Google Ventures (GV) in Europe, former head of Google for Entrepreneurs in Europe, and founding head of Campus London, Google's first startup hub. Eze writes on Israeli tech, venture capital, artificial intelligence, and founder strategy.
He is also the founder of Techbikers, a nonprofit that brings together the startup ecosystem on cycling challenges in support of Room to Read.
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