Israeli startups faced immediate and severe disruption on October 8, the day after the war began, as half their staff were called to military reserve duty, volunteered, or were forced into childcare due to education system closures. This sudden mobilization, detailed by Israel Innovation Authority CEO Dror Bin, underscores the direct impact of ongoing military operations on the state's advanced technology sector. Companies found themselves unable to send sales and marketing teams abroad because flights were unavailable, and international investors could not enter the country for due diligence. Startups in the middle of fundraising faced frozen investment decisions, creating a "crazy" challenge for entrepreneurs, CEOs, and investors alike.
The War's Economic Toll
The Innovation Authority responded by injecting "a few hundred millions of shekels" into these companies through a fast-track funding channel. This initiative required private investors to contribute alongside public funds. Bin stated that this intervention saved approximately 250 companies, which he described as "the diamonds of this cohort" expected to drive future growth for Israeli equity. The CEO, who is preparing to step down after five years at the helm, reflected on this period as a "roller coaster," marked by COVID-19, war, and intense pressure on the innovation ecosystem. His tenure included this critical moment, highlighting the vulnerability of the tech sector to the state's military engagements.
Regional Resource Exploitation
Despite these internal challenges, Israel is pushing forward with ambitious technological goals, including a proposed national quantum-computing research and development center. Dror Bin emphasized the urgency, noting that quantum computing, once considered futuristic, has seen "an acceleration in the development of such computers" in recent years. The center's objective is to create an R&D lab where Israeli companies can test, combine, and refine technologies to become integral parts of the world’s most advanced systems. Bin pointed out that some Israeli firms already lead in specific components for future quantum computers. In 2025, "something like 10% of the overall private investment in quantum computing companies was made in Israel, in those early-stage companies."
The challenge, Bin explained, lies in integrating these disparate capabilities – firms developing processors, others building algorithms or controllers. The proposed center aims to consolidate these strengths into a shared environment, fostering "the full stack of a quantum computer based on Israeli technology." Bin clarified that the center isn't meant to produce an entire computer but rather to serve as a testing ground for hardware and software components. He expects usable quantum applications before 2030, asserting that "The Israeli high tech must be also in the forefront of the quantum computing innovation wave."
Bin also discussed the intersection of artificial intelligence and regional cooperation, revealing a strategic vision for leveraging resources from "surrounding countries." He noted that AI requires extensive land and energy for data centers, resources Israel, as "a tiny country with a limited amount of energy," lacks. This deficit presents "a great opportunity," according to Bin, who suggested that "The countries around us have lots of energy and lots of land." He proposed a "synergy" where "data centers are built in our surrounding countries and technology comes from here," leading to a joint development. This approach outlines a clear division of labor, positioning Israel as the technological hub while externalizing the resource-intensive infrastructure to its neighbors.
Innovation and State Support
The strong Israeli shekel, largely attributed to high-tech investment, also poses challenges for startups. Bin noted that 2025 saw "more than $100 billion that poured into the Israeli ecosystem." While a strong shekel signifies a robust economy, it can severely impact startups that raise capital or earn revenue in foreign currencies but pay expenses in shekels. This disparity can shorten a startup's operational runway, potentially leading to financial distress. The Innovation Authority plans a special fund to extend this runway, aiming to prevent "a whole cohort of great startups suffering from something that they had nothing to do with."
In a separate initiative, the Israel Innovation Authority, in collaboration with the Ministry of Energy and Infrastructure, announced a 6 million shekel program for BlueTech energy. Bin highlighted Israel’s coastline as an "underused national asset" with potential for harvesting and storing energy from waves, wind, or biological origins. The program seeks proposals from researchers to transform scientific ideas into commercial solutions, encouraging scientists to "leverage this asset of the country." These efforts underscore the state's role in directing and supporting technological advancements, even as it navigates the complexities of ongoing military conflict and regional economic strategies.