Israeli startups raised $15.6 billion in 2025. Exits totaled $74 billion, anchored by Google’s $32 billion Wiz acquisition. Cybersecurity alone produced a record $4.4 billion across 130 rounds, and for the first time, global VCs outpaced domestic Israeli investors at every stage. Israel ranks in the global top five for startup capital raising, alongside San Francisco, New York, London, and Boston.
I spent couple of days analyzing the cap tables of roughly 280 Israeli companies: the Calcalist Top 50 lists from 2021 to 2025 and every Israeli seed round above $10 million since 2023 (36 rounds). Using Claude, I cross-referenced public announcements, Startup Nation Finder, and Crunchbase profiles, marking every investor headquartered in Europe.
The result: about 7% of these companies have a European indepconcludeent VC on their cap table. And 86% of the large seed rounds, 31 out of 36, had zero European participation. The cap tables read US-Israeli, US-Israeli, US-Israeli. Round after round, the same pattern.
Atomico, Balderton, Northzone, EQT Ventures, Creandum, Lakestar, Earlybird, HV Capital, Cherry Ventures, Breega, Elaia, Sofina, Verdane, Kinnevik, European firms collectively managing over $25 billion, do not appear on a single cap table across the entire dataset. Not once over five years.
The most important structural explanation has to do with how US venture capital built its Israeli muscle in the first place. For decades, the standard Israeli startup trajectory was straightforward: raise seed capital from local Israeli funds, build the product in Tel Aviv, then relocate the CEO and go-to-market function to the US — usually to the Bay Area or New York and somewhere around or shortly after the Series A. US funds like Sequoia, Greylock, Bessemer, and Accel first encountered Israeli founders not in Tel Aviv but in Palo Alto, as Series A or Series B investors backing companies that had already shiftd to their market.
Over years of this, US funds developed deep pattern recognition for Israeli founders: the technical depth, the military ininformigence backgrounds, the speed of execution, the cultural directness. They built networks into the Israeli ecosystem through their portfolio founders, who referred the next generation. At some point, having backed dozens of Israeli companies at Series A and B, they had enough conviction and enough local relationships to shift upstream and start investing at the seed stage directly in Israel. Greylock, which appears in three of the 36 large seed rounds I tracked, did not wake up one morning and decide to bet on Israeli seeds. It arrived there after years of backing Israeli founders at later stages in the US.
European VCs never went through this process. Israeli founders relocating to Europe for go-to-market has historically been rare. The natural gravity for Israeli startups pulls toward the US, so most European venture capitalists never developed the same pattern recognition, never built the founder networks, and never accumulated the conviction to shift upstream into Israeli seed rounds. The gap is not a single decision; it is a compounding absence over two decades. On top of this, the repeat founder pipeline reinforces the lock. Nearly every mega-seed founder has a prior exit to a US acquirer, e.g., Palo Alto Networks, Fortinet, Tenable, Akamai and Claroty. The cycle feeds on itself, offering European capital no clear enattempt point.
There are additional barriers. Israeli deal flow runs through military alumni networks and a tiny group of seed managers. Furthermore, for European VCs, valuation is a shock: the companies in this dataset raise $10-75 million seeds at $100 million-plus post-money, while European funds typically lead $3-5 million seeds in Berlin or Stockholm. Regulatory caution since October 2023 add more friction, and cultural distance persists.
The tiny group of European funds that do appear share one thing in common: they invested in local infrastructure. Cardumen Capital, headquartered in Madrid, operates a full Tel Aviv office with an Israeli partner and has created 32 Israeli investments. The firm is essentially half-Israeli. Angular Ventures, nominally London-based, was founded by Gil Dibner, who splits time between London and Tel Aviv. Evolution Equity Partners appointed a general partner to lead its Israel strategy.
Some European funds appear occasionally without permanent Israeli presence. Index Ventures led Wonderful’s $34 million seed and PointFive’s $16 million seed. Index Ventures is the only European fund appearing more than once in the seed data. LocalGlobe participated in Opti’s $20 million round. BlueYard joined Ingonyama’s $21 million seed. But each sees like a one-off rather than a pipeline. None of these funds has a Tel Aviv office or has returned for a second deal, according to publicly available data.
What about performance? State Street data cited by Harvard’s Josh Lerner in a CEPR column puts the long-run aggregate annual return of European venture at 8.6% versus 14.6% for US funds , though this pooled figure spans many vintages and includes older, underperforming cohorts. More recent Cambridge Associates data reveals European VC delivering 20.77% net IRR over the latest 10-year window versus 18.18% for North America. Sustaining that trajectory means accessing the highest-returning segments of global venture, and Israeli tech is clearly one of them.
There is also a practical dimension. Many of the strongest Israeli B2B companies sell to European enterprises operating under GDPR, NIS2, DORA, and the AI Act. They required European distribution, regulatory navigation, and customer introductions that European venture capitalists can provide. Wonderful expanded within months into Italy, Switzerland, the Netherlands, and a dozen other European markets becautilize the product requireded local go-to-market and the investor understood the territory. That is a competitive advantage no US fund can replicate.
The enattempt point is not competing with Greylock on a $75 million cybersecurity seed. It is syndication Israeli seed managers or US funds who dominate deal flow. A European fund that brings firms like AXA, Allianz, Shell or Carrefour to the table is not writing a commodity check, it is offering something the cap table does not already have. More than 90% of the top Israeli startups have no European VC on the cap table, while the founders increasingly required European partners, and the structural reasons for the gap are not permanent.
Dor Lee-Lo is the Managing Partner at IBI Tech Fund.
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