Israel Launches State-Backed Defense-Tech VC Funds to Secure Technological Independence
Israel's Ministry of Defense and Ministry of Finance are launching state-backed defense-tech venture capital funds, including Adir Capital led by Maj. Gen. Michel Yanko, to secure technological independence and fund growth-stage startups.
The Ministry of Defense, through the Directorate of Defense Research and Development (DDR&D / MAFAT) and in collaboration with the Accountant General's Department at the Ministry of Finance, is establishing dedicated state-backed venture capital funds focusing on the defense-tech sector. This joint initiative stems from mounting security and technological needs driven by recent warfare and geopolitical shifts, aiming to bridge the venture capital gap in capital-intensive, high-risk defense sectors and secure Israel's technological, industrial, and operational independence.
Tender Selection and Fund Structure
Following a competitive tender process managed by a tender committee led by the Accountant General’s Finance Division, two winning firms were selected: Adir Capital, backed by Idan Financial Instruments, and Sling Capital, backed by Giza. Both funds will operate entirely independently of each other, pursuing strategic investments designed to reinforce critical supply chains, stimulate economic growth, and create new employment opportunities.
Adir Capital plans to raise over half a billion shekels, currently engaging leading domestic and international investors. The fund is chaired by Maj. Gen. (Res.) Michel Yanko, who served as the Head of the IDF Technological and Logistics Directorate during the Swords of Iron war, alongside senior experts from the defense establishment, the defense industry, and the capital market, led by Barak Capital.
Investment Focus and State Guarantees
Adir Capital's investment strategy targets Israeli defense-tech companies that have already proven their technology, products, and market presence, and are transitioning into accelerated growth. Approximately 80% of the fund's capital is allocated for growth-stage investments (Growth Scale-Up) in Series B/C companies, while about 20% will target early-stage investments (Venture Alpha) in Series A startups.
"The collaboration with MAFAT and the Ministry of Finance grants the fund direct insight into the procurement needs of the defense establishment alongside robust support for international expansion."
Concurrently, the Ministry of Finance's involvement entails providing state guarantees, serving as a risk-mitigation mechanism to leverage private capital for national objectives. Through these financial instruments, the state aims to bolster domestic entrepreneurship, foster economic growth engines, and ensure resilient responses to security and economic challenges in routine and emergency times.
