The Israeli tech ecosystem is showing no signs of slowing down. Baz, an AI-powered code review startup founded by Bridgecrew co-founder Guy Eisenkot, has completed a $9 million extended seed round and launched "Baz Planner", a multi-agent platform that performs architectural-level code review before a single line of code is written. The round, co-led by Battery Ventures and boldstart ventures with participation from AFG Partners and Disruptive VC, brings Baz's total funding to $17 million.
Almost simultaneously, Arato, a young AI startup founded by entrepreneurs who previously sold a company to Fiverr, announced a $10 million seed round led by TLV Partners, with participation from Jibe Ventures and prominent angel investors including Raghu Raghuram (Andreessen Horowitz partner and former VMware CEO) and Marianna Tessel (former Intuit CTO). Arato is building an enterprise-grade behavioral assurance platform that simulates thousands of user interactions to detect failures, AI hallucinations, accuracy issues, and security risks before and after deployment.
Regulatory Moves: Innovation Authority Expands Startup Fund
The Israel Innovation Authority announced a significant expansion of its government-backed Startup Fund to support early-stage DeepTech companies. The changes, effective July 15, include raising the maximum IIA investment at Pre-Seed from NIS 1.5M to NIS 2M, and at Seed from NIS 5M to NIS 6M. The total round cap under the Seed program increases from NIS 25M to NIS 30M (north of $10M).
The move addresses rising R&D costs in fields like AI, quantum computing, and defense technology, giving Israeli startups more runway in a competitive global market. The fund offers non-dilutive grants that require matching private capital, a model designed to de-risk early-stage investing in capital-intensive deep tech ventures.
Record Half-Year: $8.6 Billion Raised in H1 2026
Data from Poalim Tech and Dealigence shows the strongest first half for Israeli tech since 2021. Total fundraising reached approximately $8.6 billion in H1 2026, a 45% increase year-over-year. However, the number of rounds dropped by roughly 35%, indicating growing concentration: investors are writing larger checks into fewer, more mature companies with proven traction.
Cybersecurity remained a standout sector, with investment more than doubling compared to H1 2025. Enterprise AI, fintech, and defense-tech also saw strong demand.
M&A and IPO Pipeline
On the exit side, H1 2026 saw several notable deals: Nuvei's acquisition of Payoneer for $2.75B, Motorola Solutions buying D-Fend Solutions for $1.5B, Apple acquiring Q.ai for $1.5B, and Credo acquiring DustPhotonics for up to $1.3B.
On the IPO front, UVision (loitering munitions) plans to file a Nasdaq prospectus in July at a $3–3.5B valuation, and the Israeli government is exploring U.S. listings for IAI and Rafael, potentially among the largest privatizations in the country's history.
The Bottom Line
The Israeli high-tech sector wraps up June and H1 2026 with a mixed but optimistic picture: mega-rounds and blockbuster exits reinforce Israel's global standing as an innovation powerhouse, while the concentration of capital in fewer companies makes it harder for early-stage startups to raise without clear traction. The Innovation Authority's Startup Fund expansion signals that policymakers recognize the gap and are trying to build a safety net for the next generation of DeepTech companies.
