‘War is good for business’: Israeli startups going global after key role in Gaza

Reuters — The drone that tracked Hamas leader Yahya Sinwar and filmed him as he lay dying in footage beamed around the world last October was made by Israeli startup Xtend, according to media reports, one of many such firms to get a boost from Israel’s war needs.

Xtend’s co-founder and CEO Aviv Shapira declined to comment on the unsourced reports, but told Reuters his company provides indoor drones to the Israeli army, which has looked beyond just major manufacturers for a cutting edge in its assault on Hamas that followed the terror group’s deadly attack on Israel on October 7, 2023.

Xtend drones integrate artificial intelligence to conduct high-precision strikes, and can be operated from 9,000 kilometers (5,600 miles) away with minimal human intervention.

“We’re actually re-learning how to fight with robots,” Shapira said in an interview.

The Israel Defense Forces and Defense Ministry declined to comment on the equipment used to target Sinwar.

In Ukraine, startups making drones and other military technology and equipment have proliferated, and helped it hold off much larger Russian forces. Small, nimble companies with a focus on innovation have proved vital in a war where rapid solutions can trump years of design and product testing.

Startups are a “group of few people that can do something in weeks,” and war creates an urgency for immediately usable technology, said military expert Isaac Ben-Israel.

Israel already had a thriving startup scene, meaning its companies may be better placed to capitalize on the wartime boom, with some already winning orders from abroad and aiming to shape the battlefield of the future.

In less than a year and a half of war, Xtend has signed a major contract with the Defense Ministry, raised $40 million in its second funding round in August, and signed an $8.8 million contract with the US government, Shapira said.

Sequoia Capital, a US venture capital fund managing around $85 billion focusing on early-stage investment, returned to investing in Israel after the October 7 attack, having previously not invested in companies there since 2016.

“War gives people experience,” Sequoia partner Shawn Mcguire told Reuters.

High-tech is Israel’s economic engine, accounting for 16 percent of employment, more than half of exports, a third of income taxes, and 20% of overall economic output.

‘New capabilities’

Xtend’s Shapira was carrying his surfboard to the beach on October 7 when he heard sirens warning of incoming rockets from Gaza. In less than 12 hours, he had dispatched a fleet of drones to help search and secure buildings, he said, in the kind of rapid response essential in emergencies.

Since the start of the war, the Defense Ministry has been working with startups “to improve and deploy new capabilities for our forces in the field,” Colonel Nir Weingold, head of planning, economics and IT at the ministry’s Directorate of Defense Research & Development (DDR&D), told Reuters.

The ministry has a “green path” for selected startups under which it fast-tracks its licensing process, and said it awarded orders to 101 startups and small companies to support the war effort totaling 782 million shekels ($219 million) between October 7, 2023, and the end of 2024.

More than 25 of those startups had transitioned from development to production due to the war, it said, adding around 50% of anti-drone technology used by the military during the conflict came from startups.

This collaboration was on display at the first-ever Global DefenseTech conference organized by the DDR&D with the Blavatnik Cyber Research Center at Tel Aviv University that showcased dozens of startups, catching the eye of major multi-nationals.

“War is good for business and Israel has been a major partner,” said Ayal Somech, head of growth and innovation at Boeing Israel, on a panel at the conference.

Anti-drone technology has been a particular challenge for Israeli forces as they have faced different hardware in attacks from Gaza, Hezbollah in Lebanon, Iran, and the Houthis in Yemen.

Lior Segal, the co-founder of Israel’s Thirdeye Systems, which makes advanced warning systems for attack drones, told Reuters that its contacts with the Defense Ministry went from development phase to winning “meaningful contracts” during the war.

The company, whose shares have risen about 50% since the start of the conflict, said it now had seven to eight product lines, compared with around three before the war.

On Tuesday, Thirdeye, whose customers include NATO countries as well as Israel, said it had sold a 30% stake to Emirati state-owned defense conglomerate EDGE for $10 million, in a rare public investment by an Emirati firm in Israel.

The investment will help Thirdeye expand into new markets, Segal said in a statement, though it is contingent on approval from the Defense Ministry and other milestones.

Times of Israel staff contributed to this report.

You’re a dedicated reader

Join Our Community

Join Our Community

Already a member? Sign in to stop seeing this