'Revolutionary’: Defense Ministry start-ups grab investments of NIS 500m.- exclusive

Start-ups funded by the Defense Ministry have attracted half a billion shekels in investments during the Gaza war, a senior Defense Ministry official told The Jerusalem Post.

The official, Defense Ministry Head of the Planning, Economics & IT Department Col. Nir Weingold, also told the Post that the Russian invasion of Ukraine and potential conflicts in Asia relating to China have led to unprecedented interest globally in Israeli defense technology, despite criticism relating to the Gaza war.

More specifically, Weingold said that during the war, 10% of alumni of 50 start-ups from a special program to selectively give out seed funding not only secured follow-up R&D orders directly from the Defense Ministry totaling more than $5 million, but also attracted outside investors’ funding exceeding half a billion dollars.

In July, the Defense Ministry’s Directorate of Defense Research and Development (DDR&D), led by Brig. Gen. (Ret.) Dr. Daniel Gold, hosted a Demo Day, spotlighting the latest innovations from start-ups participating in its Innofense accelerator program.

The July event “showed off the third- and fourth-round demonstrations for investors,” though the ministry is now off and running with its fifth round of start-ups, Weingold stated.

According to Weingold, “There were 100 investors, including the top ones, and we got great feedback. This was a real jump in the level of investment attention and quality compared to the last similar event in February 2023.”

The event, said the ministry, highlighted the achievements of these start-ups, providing them with a platform to present their cutting-edge products to investors, engage in networking opportunities, and frame their crucial role during the war, where their projects significantly bolstered R&D efforts.

Weingold said Innofense has continued to bridge the gap between the Defense Ministry and the entrepreneurial community.

Nurturing cutting-edge technology 

The program, which connects the ministry’s challenges with innovative solutions, “fosters small and agile companies to develop defense technologies,” said a ministry statement.

“It provides start-ups with techno-operational support from DDR&D and professional guidance from iHLS and SOSA.”

The Israel Homeland Security and SOSA accelerators have already been the main civilian sector bridge for the Shin Bet’s (Israel Security Agency) own start-up initiative in the Ashkelon-southern region in recent years.

All of this leads to vital assistance in “business development, market penetration, networking, and investments,” said a ministry statement.

Selected start-ups participate in a four to six-month pilot program, and the start-ups that succeed during the pilot program stage then advance to system integration while retaining their intellectual property.

The ministry stated that, “The program’s results underscore the program’s prowess in nurturing cutting-edge defense technologies and its significance in addressing Israel’s most pressing challenges.”

During the July event, “Start-ups captivated attendees, including investors, VCs, industries, and representatives from the private sector, with their cutting-edge technologies, each presenting a unique solution to a pressing defense challenge.”

One example is Wonder Robotics’ autonomous drone landing solution, WonderLand, which is “a highly unique solution that allows vertical take-off and landing (VTOL) drones to land safely and completely autonomously on any uncharted, unprepared, and unattended site, without operator involvement or supervision of any kind.”

Wonder Robotics’ website said, “In simplistic terms, WonderLand combines advanced two-dimensional semantic algorithms to determine an approximate landing area based on various factors (including flight altitude).”

One drone can maneuver through all kinds of tunnels while rolling a backwards real-time video to headquarters.Another example of a start-up funded by the ministry is Next Dim, which uses an advanced analysis platform for detecting financial crimes and identifying networks of influence on social media.

According to its website, Next Dim is a “revolutionary, proprietary, high-performance network analysis solution dedicated to automated discovery of patterns within large networks of financial transactions, customer behavior and social media, payment systems, cryptocurrencies, and more.”

In addition, Next Dim “has great visualization capabilities of vast networks.”

Other start-ups include VieRally’s predictive viral marketing platform boasting 92.1% accuracy, Spinedge’s Spintronic-based AI chiplet offering tenfold improvements in speed and energy efficiency, MindsView’s ARNet glasses enabling real-time visual sharing, and Davinci Neuroscience’s platform designed for peak brain performance.

Each of these companies “showcased the potential of the Innofense program to revolutionize defense technology, highlighting the critical need for collaboration between start-ups and the defense sector and reinforcing the vital role of venture capital and private investment in driving forward these innovations,” said the ministry.

All of this comes out of a current initial ministry investment per start-up of a meager NIS 200,000.

DEFENSE MINISTRY Director-General Maj.-Gen. (res.) Eyal Zamir said, “The challenges of our time, highlighted by the difficulties of the war, illustrate the importance of this event. The Defense Ministry’s investment in start-ups speeds up processes and reduces bureaucracy, encouraging innovation, creativity, and initiative.”

Weingold added, “Israel faces unique challenges as a small country in a tumultuous world where defense budgets are increasing. These budgets now reach start-ups to secure advanced technologies for national security.

“Defense-tech is a growth engine for this new era. Our vision is to achieve a 100x impact together, cementing Israel as a global defense-tech leader. With start-ups, we’re fostering cutting-edge technology that enhances our military capabilities and economic growth, keeping Israel at the forefront of defense and civilian innovation,” said Weingold.

Regarding the current war, Weingold explained, “Alumni have capabilities in the field. Next Dim is already working with different units on different activities. It has a monitoring campaign using open intelligence regarding financial issues, some of which is classified.”

Another technology from a fourth-round alumni, noted Weingold, “purifies water found in the field for drinking,” to make advancing forces more resilient in terms of supply chain issues as they maneuver.

The whole process of learning to work with start-ups in the official Innofense program has also made the ministry more adept at working on a rapid ad hoc basis with a start-up or new private company that can help immediately solve a problem in the field for IDF troops, said Weingold. An example could be a very specific technology for dealing with a new kind of tunnel situation discovered in Gaza.

Now, the ministry has officials with the authority to, in some circumstances, leapfrog over requiring a proof of concept, and to drop all kinds of standard supplier registration and placing bond requirements, so that a company with a useful idea can immediately get it into the hands of the IDF.

Weingold said the process previously could take two years to bring on a new defense supplier, but now can be done in two weeks without much fanfare.

As of 2023, the ministry was taking on around 16 new start-ups at a time.

This was in contrast to the Shin Bet, which usually only had five start-ups per “class.” Previously, senior ministry officials told the Post that “the IDF is much larger and the work is more diverse than the other defense agencies.”

DDR&D is up to working with 270 start-ups, 200 directly, and 70 in indirect ways, said Weingold, noting that “we want to raise this to working with 1,000 start-ups.”

How does DDR&D manage to keep track of so many subcontracted new business partners? DDR&D has a staggering 800 workers covering 70 different branches.

One surprising piece of good news from Weingold is that despite partial arms freezes from the US and the UK, and a partial boycott of Israeli defense products by France at a defense conference in Paris in June, the Jewish state’s defense sales are still soaring.

He said, “The synergy of the start-ups, which move fast, with the private sector and then also with an entity like DDR&D brings a flourishing of cutting-edge defense technology and ideas to Israel. It takes us far.”

Further, he added that Israel’s defense sector has a large backing because of threats in the East with China and Taiwan, and separately with Ukraine. “Many countries see this as their war. It caused global shuddering and fear” of what threats Russia might pose to them as well.

Despite the dissonance regarding Israel and the war, he said, “The technology of Israel and defense technology specifically are super strong, earning billions of dollars.”

Further, he said, “There are some lost company or state contracts, but with most government-to-government contracts, especially with defense technology development, we don’t see a problem. Israel’s defense sector is super strong, so there is high interest and it is viewed as attractive” to provide defense against Russia, China, and others.

For example, he noted, “Even though Israel was blocked from walking through the front door for much of the Paris defense conference, there were huge amounts of buying from Israel’s defense sector on the side.”