Investment in Israeli health tech startups dove 40% in 2025 – report

Investment in local healthcare-focused startups last year plunged to their lowest level in five years, after a slight recovery seen in 2024, according to a joint report by the Israel Advanced Technology Industries Association, the Israel Innovation Authority and PwC Israel.

Last year, Israeli health tech, or life sciences, startups drew $1.6 billion in private investments, a 40 percent decline over the funds raised in 2024 and less than half the $3.3 billion recorded in 2022, the data in the report showed. At the same time, average funding deal size fell below $10 million for the first time in at least five years.

While investment in health tech companies declined, overall investment in Israeli tech startups and firms increased 24 percent to $15.6 billion in 2025, according to data by Startup Nation Central, which tracks the local tech ecosystem.

“When we look at the trends for the tech industry as a whole, we see that three areas, which are cybersecurity, defense tech, and AI, mainly attracted investment, and for more traditional tech industries, including health tech, 2025 was a significantly challenging year in terms of fundraising volumes,” Omer Gavish, life sciences leader and partner at PwC Israel, told The Times of Israel.

“Overall for health tech it is always more challenging than other tech industries as huge amounts of funds need to be invested, since the development phase of technologies is much longer until validation and investors can see a product.

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“Therefore, in times of geopolitical uncertainty, it was even harder to attract investments,” said Gavish.

Over the past two and a half years, local startups and tech companies continued to run their businesses, despite fundraising challenges, as they sheltered from rockets and as many of their executives and employees were repeatedly called up to reserve duty following the outbreak of war with the Hamas terror group on October 7, 2023, which spread to multiple fronts.

Gavish noted that, globally, 2025 marked a recovery year for investments in health tech and life sciences companies.

“Israel is separate from the global trend right now, when it comes to private equity investments, when it comes to IPOs, or even public companies raising money,” said Gavish. “However, we do see that with regard to merger and acquisition deals, there is interest by global companies in more mature Israeli companies, which is encouraging.”

Health tech (covering digital health, medical devices, and pharma and biomedicine) constitutes about 20% of the Israeli tech ecosystem. The sector has 1,800 active companies employing some 81,000 people. In 2025, 67 companies were established in Israel, the lowest number since 2023. In the first three months of this year, 12 new health tech startups were added, with biomed companies leading the way.

The biomed sector accounts for approximately 30% of the companies operating in Israel, but employs more than 50% of the 81,000 employees in the industry.

Sector by sector analysis showed that investments in medical devices companies sank by more than 60% in 2025, reflecting investors’ caution toward funneling funds into longer and more capital-intensive development of technologies. By contrast, investments in biomed companies remained stable over the past three years and demonstrated greater resilience to geopolitical shocks.

“Fundraising data for the first three months of the year show a similar trend as in 2025, but with the recent US agreement with Iran we hope that 2026 will be a year of change,” said Gavish.

Commenting on the report, Karin Mayer Rubinstein, CEO of the Israel Advanced Technology Industries Association, said that the industry was grappling with “one of the most complex and challenging periods it has ever known.”

“Alongside the ongoing security reality, geopolitical uncertainty, prolonged reserve duty call-ups, and growing global competition for capital and investments, the industry is also facing significant economic challenges, including the weakening of the dollar [against the shekel], which directly affects many Israeli companies,” said Rubinstein. “While a substantial share of their revenues is received in dollars, most of their expenses, first and foremost employee salaries, are paid in shekels.”

“This reality creates significant erosion in profitability and harms companies’ ability to continue investing in growth, hiring employees, and developing new technologies,” Rubinstein cautioned.

As a result, “we have witnessed a worrying trend of startups incorporating outside Israel, an issue with long-term strategic significance for the local economy and the entire industry,” she continued.

Rubinstein said the association was working with the Finance Ministry, the Israel Tax Authority, the Israel Innovation Authority, and other professional bodies in government ministries on solutions and measures to help strengthen Israel’s competitiveness and encourage startups to incorporate and operate inside the country.

“What is needed now is to continue strengthening Israel’s attractiveness for investments, achieve security stability, expand funding sources, and deepen international collaborations, to ensure that Israel’s life sciences industry continues to be one of the central growth engines of Israeli high-tech in the coming years,” said Rubinstein. “We are working to create the conditions that will make Israel once again the natural choice for entrepreneurs and startups to establish, grow, and remain.”