The next generation of Israeli entrepreneurs is in defense tech - opinion

For decades, Israel's technology story has been defined by its ability to turn military experience into commercial innovation. Cybersecurity is perhaps the clearest example. Young Israelis left elite military units with technological expertise, identified problems that extended far beyond the battlefield, and built companies that became global leaders.

Today, we are witnessing the beginning of another shift. Some of Israel's most ambitious entrepreneurs are no longer looking only to cybersecurity, enterprise software, or consumer technology for their next venture. Increasingly, they are choosing defense tech.

This is not simply a consequence of October 7, nor is it a temporary response to war. It reflects a broader transformation in the global technology industry and in how the next generation of Israeli entrepreneurs thinks about the problems worth solving.

Five or 10 years ago, launching a defense start-up was far from an obvious choice for an Israeli entrepreneur. Defense markets were considered difficult to enter. Procurement cycles were long, customers were governments, regulation was complex, and venture capital investors often preferred the scalability and speed of software businesses. Many talented engineers and military veterans naturally gravitated toward cybersecurity, cloud computing, and enterprise software instead.

That calculation is changing.

The wars in Ukraine and the Middle East have exposed new technological needs at extraordinary speed. At the same time, rising geopolitical tensions have pushed governments across Europe, the United States, and elsewhere to rethink defense spending and technological preparedness.

The result is a market that looks very different from the one entrepreneurs faced only a few years ago.

But perhaps the most important change is not the amount of capital entering the sector. It is the people entering it. We are seeing entrepreneurs and early employees who combine operational military experience with backgrounds in artificial intelligence, cloud computing, software, and other areas that historically sat outside the traditional defense industry. We are also seeing experienced executives from Israel's defense companies who have spent years managing complex technological programs choose to build their own companies. This combination is particularly powerful.

Defense technology is different from conventional software. Understanding the technology is not enough. Founders need to understand how a product will actually be used under operational conditions, how military customers think, and what problems genuinely need to be solved.

Israel has an unusually deep pool of people with exactly that experience.

At the same time, it has one of the world's most mature start-up ecosystems. Engineers and entrepreneurs who understand AI, cloud infrastructure, and software can work alongside people who have spent years dealing with operational challenges in the field.

The convergence of these two worlds is difficult to replicate elsewhere.

Because it is already influencing the technologies being developed. Autonomous systems, counter-drone technologies, advanced sensing, cutting-edge artificial intelligence, and new forms of maritime and aerial defense are increasingly being approached with the speed and mindset of the technology industry rather than solely through traditional defense development cycles.

That distinction matters. The technological requirements of modern warfare are evolving too quickly for innovation to take years.

The traditional defense industry will remain essential. Building complex military platforms at scale requires enormous engineering, manufacturing, and integration capabilities.

Start-ups serve a different role.

They can focus on a single problem, experiment quickly, take technological risks, and adapt their products as operational needs evolve. The most interesting question, therefore, is not whether start-ups will replace traditional defense companies. They will not.

The question is what becomes possible when start-up speed is combined with the capabilities of established defense industries and the needs of military customers.

This is also why international collaboration will become increasingly important. No Israeli defense tech start-up should be built with Israel as its only market.

The challenges these companies are addressing are global. European countries are increasing defense investment, the United States is looking for ways to accelerate defense innovation, and militaries around the world are confronting many of the same challenges.

For Israeli entrepreneurs, the opportunity is therefore significantly larger than the domestic market. Building relationships with international investors, defense companies, governments, and military customers early will be critical to creating the next generation of global companies.

Israel has reinvented its technology ecosystem before.

The country's cybersecurity industry did not become a global powerhouse overnight. It emerged because a unique concentration of talent, experience, capital, and market demand came together at the right moment.

Defense tech may now be approaching a similar moment. There is capital entering the sector. There is global demand. Technological breakthroughs in AI, autonomy, robotics, and sensing are changing what is possible. Most importantly, a generation of Israeli entrepreneurs increasingly sees defense not as an old industry, but as one of the most consequential technological challenges of their careers.

For many of them, the motivation also differs from previous startup cycles. Recent events have made the problems they are trying to solve tangible and immediate. Building technology that protects soldiers, civilians and critical infrastructure is no longer an abstract market opportunity.

That sense of purpose should not be underestimated.

The next great Israeli technology company may still be a cybersecurity company, a fintech platform or an enterprise software business. Israel will continue to produce all of them.

But when we look at where some of the country's most ambitious engineers, experienced executives and returning entrepreneurs are choosing to spend the next decade of their lives, a new direction is becoming increasingly difficult to ignore.

The next generation of Israeli entrepreneurship is already taking shape. A significant part of it will be built in defense tech.

The author is a founding partner of Kinetica Ventures and an experienced investor in defense tech and cybersecurity, with a background spanning venture capital and the US Department of Defense.