Why hi-tech Israel struggles against low-tech threats

When a Houthi drone launched 2 000km away in Yemen struck a Tel Aviv apartment building last Friday, 19 July, killing one and injuring eight, it exposed more than just a gap in Israel’s air defences. The incident, and hundreds of others involving drones and short-range guided missiles since 7 October, highlight a critical weakness in the country dubbed the “start-up nation” – its struggle to rapidly innovate in defence technology.

The demand for battlefield innovation from field officers is coming in thick and fast, according to industry insiders. There’s an urgent need for solutions in tunnel detection; counter-drone measures; artificial intelligence (AI)-powered sensor analysis; predictive gun sighting; advanced robotics; and other areas. These technologies wouldn’t just save lives, but also redefine Israel’s approach to asymmetric warfare. While it’s true that an unknown number of innovative solutions remain classified, the defence-technology entrepreneurs and industry insiders I spoke to say the defence establishment’s ability to supply those innovations rapidly remains patchy.

For thousands of techies, who in their day jobs are software developers, system architects, product managers, DevOps (development operations) engineers, chief technology officers, heads of research and development, and many other titles, the urgency is keenly felt. Many have experienced combat up close, and have firsthand experience of things that need quick technology solutions.

The challenges they describe in breaking into the Israeli defence industry are significant: projects can languish for months or even years, mired in evolving demands and personnel changes; spiralling development costs; a culture favouring established defence giants over disruptive upstarts; limited access to battlefield validation and data; onerous requests for information (RFIs) that risk IP (internet protocol) exposure and don’t guarantee follow-on engagement; and heavy export regulations driven by opaque geopolitical considerations.

Many civilian entrepreneurs working on defence technology say they’re stymied by a system resistant to the very traits – fast prototyping, risk-taking, multidisciplinary approach, and a global-first outlook – that make Israelis world-beaters in fields such as cybersecurity, AI, digital health, and life sciences, financial tech, enterprise IT, and other sectors.

Financial hurdles are equally daunting. Risks and timelines are lengthy. Traditional venture capitalists have shied away, leaving start-ups unable to bring innovation to fruition. They risk running out of runway or being acquired by larger firms, stifling competition and innovation.

The numbers are stark: in cybersecurity, 523 active firms have raised a total of $43 billion (R789.9 trillion); in fintech, 416 start-ups have secured $19 billion (R348.6 trillion). But defence tech? A mere 176 start-ups have raised just $1.58 billion (R29 trillion), according to Start-Up Nation Central’s data platform.

“Israel needs to bridge the divide between start-up nation innovation and military might,” says Hamutal Meridor, a Unit 8200 veteran and former Palantir Israel general manager. “If it does, it could emerge stronger and smarter. But tough bureaucracy can stifle the entire sector.”

Moshik Cohen is a rocket scientist behind some of Israel’s top missile defence systems. In 2019, he developed an autonomous situational awareness system for tanks. The defence ministry’s response? Thanks, but no thanks, there’s no need for this. Now, Israeli tanks in Gaza and near the Lebanese border face the very threats Cohen’s system was designed to counter.

“Before this war, there was almost no room for Israeli start-ups in the defence establishment. Our defence system is broken. From strategic management, through procurement and equipment, to politicking, as a system, it’s broken,” Cohen warns.

The massacre of 7 October and the ensuing war should shake things up, at least in the short term, he says. Cohen is launching a new start-up based on his years of experience building autonomous missile defence systems for IAI (Israel Aerospace Industries) and the Israeli military.

The stakes are high. As Israel battles on multiple fronts, its ability to innovate at start-up speed could determine not just its military edge, but its economic future and global technology standing. For investors and entrepreneurs alike, the message is clear: solving Israel’s defence innovation paradox isn’t just a national security imperative, it’s a market opportunity with global implications.

There are some positive developments. The defence ministry’s Innofense accelerator has backed more than 40 dual-use start-ups. Elbit Systems, a defence giant, recently partnered with auto-tech start-ups to develop anti-drone technology. A new tech commando unit of Israel Defense Forces IT reservists aims to speed up battlefield software development.

Tel Aviv University and the defence ministry are collaborating on fast-track battlefield engineering problems, including solutions for booby traps; drone interception; adding night vision capabilities to mobile phone cameras; a USB phone charger for tanks; live video streaming for tactical dogs; and other applications.

But these developments don’t add up to a system-wide change. To move innovation faster through the defence establishment, several structural changes are needed. The first step is to recognise defence innovation as critical to Israel’s long-term security. That demands streamlined bureaucracy, simplified procurement, and a culture shift valuing speed and agility over rigid protocol.

To sustain defence-tech and dual-use start-ups, new funding models need to be created with a mix of government grants, tax incentives, and dedicated defence-tech funds. Rethinking IP rights, revenue agreements, and export controls for easier commercialisation could also help.

In the end, Israel faces a stark choice: disrupt its own defence establishment or risk being disrupted by nimbler adversaries. If ever there was a time Israel needed its start-ups to move fast and break things, it’s now.

• Award-winning writer and editor and host of The Dejargonizer Podcast, Amir Mizroch was born in Israel and raised in South Africa (Krugersdorp), studying journalism at Rhodes University. He worked at The Mail & Guardian before making aliya in 2000. In Israel, he worked at The Jerusalem Post and Israel Hayom and was later director of communications at Start-Up Nation Central.