2025 VC SurveyFortitude over resilience: Redseed’s outlook for Israeli high tech in 2025
2025 VC Survey
Fortitude over resilience: Redseed’s outlook for Israeli high tech in 2025
Partner Daniel Benjamin joined CTech to share what he believes is the sentiment among founders and investors in Israel.
“Many writers, commentators, VCs, and founders have rightly talked about the resilience the Israeli ecosystem has showcased over this past year,” said Daniel Benjamin, Partner at Redseed. “However, as we start to see signs of hostilities calming and continue to push for a safe return of our hostages, ‘resilience’ will need to turn to ‘fortitude’.”
Benjamin joined CTech for its 2025 VC Survey to discuss the sentiment among founders and investors in Israel as the war settles into its second year. Whereas ‘resilience’ is a world that has quickly spread among the community, he believes it is now time for a new frame of mind.
“While resilience encapsulated the Israeli high-tech industry’s ability to recover and bounce back from the devastating events of the 7th of October, it will now require fortitude - strength and determination - to continue carrying the economy forward,” he said.
You can read the entire interview below.
Fund ID
Name of fund/funds: Redseed
Total sum of the fund: >$1bn AUM
Partners: Eugene Belov, Daniel Benjamin, Helena Cavell
Notable/select portfolio companies (active): Welltech, Voyantis, Fintech Farm, Klay, Firefly, Apono, Stigg, FertiAI
2024 is over. How can you summarize it in terms of the Israeli high-tech industry?
We believe that looking back at 2024, many will see it as a watershed moment in the growth of Startup Nation. It has been a period where the Israeli high-tech industry truly understood its core identity and recognized its strength of character and resolve. Everyone will have their own stories of how the war impacted them personally and professionally, from reservists being called to the frontline through to founders and funds having to navigate a difficult fundraising environment, there are so many inspiring stories that will serve as powerful lessons for the future.
This year also helped many understand who they could depend on when going gets tough. Seeing Israeli Seed funds step out of their comfort zone and support their earlier-stage companies where international investors stepped back due to geo-political concerns has been amazing. As a relative newcomer to the Israeli market, Redseed, with seven new and one follow-on investments in Israel during 2024, has been equally impressed by the caliber of international investors and multinational companies galvanized to invest in Israel, particularly given the current challenges. With our friends at Sequoia and Greylock actively opening offices in Tel Aviv and multinationals showing their appetite to continue to acquire companies in the country, the high-tech industry has been able to understand where its true allies lie.
Looking ahead to 2025 - What challenges and opportunities await the Israeli high-tech sector in the coming year, and how are you, as investors, preparing for them?
Many writers, commentators, VCs, and founders have rightly talked about the resilience the Israeli ecosystem has showcased over this past year. However, as we start to see signs of hostilities calming and continue to push for a safe return of our hostages, “resilience” will need to turn to “fortitude”.
While resilience encapsulated the Israeli high-tech industry’s ability to recover and bounce back from the devastating events of the 7th of October, it will now require fortitude - strength and determination - to continue carrying the economy forward.
We have already started to see some bright shoots emerge through Q3 and Q4 of 2024 that provide a glimpse of the opportunities that could be created in 2025. While Israeli Cyber continues to account for the lion’s share of funding, we believe that blockbuster early-stage rounds into companies like Eon and Tessl say more about the opportunities for the year ahead. Seeing the high-tech sector’s ability to attract the best investors in the world to invest into Israeli companies outside of the Cyber domain is extremely promising, the greatest challenge will be to maintain this momentum and ensure that these new startups, amongst many others, have an environment in which they can thrive and build category-defining businesses.
How will new American leadership affect the global high-tech industry or economy? And where does this place Israel and its entrepreneurs?
The Israeli high-tech industry maintains very strong ties to the US economy, with Israeli entrepreneurs continuing to favor the US as the de facto market to launch their sales efforts, the impending change in American leadership towards what many believe will be a government with a more “venture oriented” mindset could yet present some new opportunities for Israeli entrepreneurs.
Donald Trump has repeatedly mentioned his ambitions to increase tariffs on Chinese goods and keep more IP and manufacturing of critical resources (such as semiconductors) in the US – if Israeli entrepreneurs can maintain their position of trust in the US market, this could create significant opportunities for Israeli-American technology products to fill this demand.
What are the three most important things the Israeli government should do today to accelerate the high-tech engine in the coming year?
While the priority for the country should be the safe return of our hostages and an end to the hostilities, plans for “the day after” will continue to play a pivotal role in the outlook for the Israeli high-tech sector. The Israeli economy and population have made huge sacrifices to support the war effort. The three most important things that the government can do today are:
- Support and nurture the creation of early-stage businesses – as history has shown us, postwar economies have the propensity to support formative periods of growth for nations, with the correct fiscal policy the Israeli government can significantly support this recovery.
- Strengthen international ties with other global economies - while efforts to achieve this goal have been ongoing for some time, over the past year this initiative has been put on the backburner due to the war. By negotiating new partnerships and agreements with other countries the government can help open new markets and facilitate greater technology export
- Inject further funding into educational institutions to support the research of cutting-edge technology – while many people in the industry argue that Israel may have “missed the boat” in the generative AI arms race, we believe we are still at the early stages of uncovering the full potential of generative AI and still stand at the precipice of unlocking several transformative technologies that will have a huge influence on the global market, most notably quantum computing.
Are there new sectors you see as relevant? Are there any fields you anticipate will weaken significantly in the coming year?
It would be impossible to answer this question without mentioning the growth of the Defensetech sector in Israel. While this industry has existed for many years, it is now coming more to the forefront due to geo-political tensions across the globe. As Defensetech becomes less of a “taboo” industry to invest in, we believe there is opportunity to create some global leaders built on the field experience and technical capabilities of individuals coming out of the Israeli military.
One outstanding example of Israeli Defensetech innovation is a startup called Commcrete. The founding team includes senior commanders from the intelligence units and the IDF. The company has developed a one-of-a-kind technology that enables the conversion of any radio into a beyond-line-of-sight satellite communications device, therefore emancipating satellite communications and removing the issues caused to these communications by physical obstructions - the company has already won sizable contracts with some of the largest Defense agencies in the world in only its first year of sales.
More transformative however could be the field of Quantum Computing. Israel has already proven itself to be a global leader in developing the hardware that fuelled the cloud revolution. Many people don’t appreciate retrospectively that Nvidia’s acquisition of Mellanox in 2020 was possibly one of the most transformative mergers for the global technology market, Jensen himself attributes a lot of Nvidia’s success to the innovation and synergies that Mellanox delivered. We believe that there is an opportunity in the market for Israel to once again flex its muscles as the quantum race continues to heat up. Israeli high-tech has the potential to deliver new technologies that will both accelerate our ability to reach quantum computing capabilities, but also protect against the cyber-security risks that this new technology will bring with it.
Is Israel missing out on the AI revolution in the global arms race? If not, what should the local industry focus on to join the global race?
The belief that a country must have direct control over a foundational AI model to participate in the "global arms race" for artificial intelligence is a growing fallacy that oversimplifies the dynamics of AI development and deployment. Having a foundational model is not the only or even the most critical, determinant of a country’s AI capabilities.
While foundational models are influential, their security implications are often overstated. National security risks more commonly stem from how AI is applied e.g., in cyber warfare, misinformation campaigns, or surveillance, rather than from the models themselves. Israel is arguably a leader in the usage of AI for practical applications, both in the security sector but also in the commercial and business-productivity side. The focus should remain on leveraging AI for practical use cases and using it as a force multiplier to maintain and increase the technological edge that many Israeli companies enjoy within their markets.
Could the global IPO drought end in the coming year?
We are optimistic about a resurgence in the IPO market in 2025 and anticipate an increase in activity across various sectors and regions. Several key factors contribute to this outlook, including the continued stabilization of interest rates and inflation and the robust performance of public markets with several indices reaching all-time highs.
While optimism prevails, we would caution that economic uncertainties and potential impacts of trade tariffs could pose challenges to the anticipated increase in IPO activity. The possibility of new tariffs, particularly from the Trump administration, may affect market dynamics and there is still the “hangover” from 2021 which could see some companies face valuation challenges with IPO pricing lower than their most recent funding rounds. However, the discrepancy between private and public valuations is shrinking, which is a positive sign for IPO activity in the coming year.
From an investor's perspective: will the coming year be better for early-stage startups or more mature companies?
We believe that the coming year could be a foundational period for the creation of early-stage startups that are rapidly grasping the opportunities that generative AI and other new technologies have to offer. However the term “better” is inherently relative. As the economy slowly moves to a postwar period and international investors that have been absent from Israel regain the confidence to invest in Israel, there will both be more capital available, but also more competition for this capital as high-quality founders who have been biding their time take the leap to start a new company.
While there could be a stronger funding environment for early-stage startups, as previously discussed, the coming year could provide more opportunities for more mature companies to exit which will add to the flywheel of early-stage startups being founded by repeat entrepreneurs and top-talent that have seen their first exit cycle.
Did you raise fund money in 2024 for an existing fund or a new one? What are your expectations regarding this matter for 2025?
We are fortunate to be an evergreen fund and will not need to raise external capital for the foreseeable future.
How many investments did you make in 2024, and how does it compare to previous years?
This year has been our first full year of investing in Israel, and we have been very active. Whilst several investments are still unannounced, we believe we are one of, if not the most active new-entrant to the Israel high-tech investment scene having invested in eight Israeli companies this year.
Provide an example of an intriguing investment you made in 2024. What sets this company apart, or what is distinctive about its sector?
One of the most intriguing investments we made this year is yet to be announced, but it sits at the crossroads of quantum computing and cyber-security. The startup offers a paradigm shift in the way that we encrypt data in transit and could form the foundation of encryption in the coming years in the same way that RSA did in the 1980s and 1990s. While the Company is still in its early stages it has built a one-of-a-kind technology that has been developed by repeat entrepreneurs and the leading academic experts in the field, already garnering attention from two of the 20 largest companies in the world in addition to nation-states and telecoms giants.
Two notable companies that you think will thrive in 2025.
Company Name: Apono
Sector + description: Apono is an API-based solution that focuses on providing and enforcing privileged access. Apono’s solution focuses on AI-driven least privilege and anomaly detection, providing organizations with the tools they need to ensure secure, just-in-time, and just-enough access to their critical resources.
Recent funding: $15.5M Series A
Founding Year: 2021
Reasoning why this is their year: Apono is built on the premise that traditional privileged access management (PAM) solutions no longer suffice in the dynamic cloud environments that businesses operate in today. The cloud, with its distributed, multi-faceted nature, has outgrown many legacy systems, necessitating a new approach to access management. As privileged access management and identity governance continue to converge, driving the need for more holistic identity and access security solutions, we believe Apono is well-positioned to capitalize on this market opportunity.
Company Name: Firefly
Sector + description: Firefly has developed a “Cloud Control Plane” to help companies solve their cloud complexity challenges. Firefly’s vision is to become the DevOps ‘single pane of glass’ across multiple cloud providers and cloud accounts turning it into the go-to platform for Infrastructure as Code (IaC) migrations and management.
Recent funding: $23M Series A
Founding Year: 2021
Reasoning why this is their year: As multi-cloud environments becoming the norm and Cloud is rapidly becoming the largest cost center for most businesses after payroll, engineers are increasingly wanting to step away from a world pre-IaC (which stands for Infrastructure as Code, including tools such as Terraform or OpenTofu) where they had to manually configure their cloud environments and couldn’t do cloud configuration version control.
