Israeli high tech companies overcame a year of war and likely raised more than $12 billion in 2024, up 31% from 2023, led by cyber security funding and investments in more established companies, Startup Nation Central (SNC) said in a report on Tuesday.

It noted that so far, $10.6 billion of private finding had been reported, versus $8.3 billion in 2023, but accounting for yet-to-be-reported rounds would raise total funding to an estimated $12.2 billion.

"In 2024, Israel’s tech ecosystem continued its transformation from a startup-centric model to a scaleup powerhouse," said Yariv Lotan, a vice president at Startup Nation Central, citing larger funding rounds, a growing number of mature companies, and increased acquisition-driven exits.

"Scaleups have moved from being acquisition targets to active acquirers ... This indicates the strength of Israel’s scaleup ecosystem and its ability to attract substantial global investment."

High-tech drives Israel's economy and accounts for 16% of employment, more than half of Israel's exports, a third of income taxes and 20% of its overall economic output.

The report noted that high-tech GDP rose 2.2% in 2024 even as overall economic growth was stagnant.

"As we enter 2025, the return of President Trump and the ongoing development in the Middle East introduces fresh opportunities for Israel's tech ecosystem, potentially deepening Israels’ collaboration within the region and opening new pathways for innovation and investment," said SNC chief executive Avi Hasson.

SNC said that in 2025, U.S. economic and financial trends would continue to shape Israel's tech ecosystem performance, while investors would focus on opportunities in sectors with long term growth potential.

Artificial intelligence, it said, was set to become a cornerstone of venture strategy while cybersecurity would remain a top investment priority and deliver significant exits through acquisitions and public offerings.

Cyber represents 7% of Israeli tech firms but raised 36% of total funding, at $3.8 billion last year.

At the same time, 15 companies raised $4 billion, or 41% of the total, versus $2 billion in 2023, "underscoring the ability of established companies to attract substantial growth investment," SNC said.It added that key challenges for the sector include a global trend of fewer newly founded startups, a reduction in the number of investment rounds, judicial and economic uncertainty that challenging investor confidence and AI.

The top 70 Israeli tech companies traded on Nasdaq rose by 15.8% in 2024.

(Reporting by Steven ScheerEditing by Bernadette Baum)