The war that began on October 7 has profoundly impacted Israeli society and the economy, highlighting the urgent need for national resilience and self-reliance. This conflict has underscored a critical lesson: Israel must strive for independence in key areas that ensure its stability—security and defense, energy, and agriculture. Realizing that international support may be limited in extreme situations has reignited a focus on technological innovation and economic strength.

In addition to these challenges, Israel is facing significant financial pressure due to the cost of the war. The government has announced a budget cut of approximately 35 billion shekels (about $9 billion) for 2024 to fund ongoing war efforts and recovery.

We must approach these challenges strategically as people who care deeply about Israel. While tactical responses—such as donations, volunteering, and other efforts—are critical in the short term, they do not address Israel’s core, long-term challenges.

Israel has earned its reputation as the "Startup Nation," renowned for innovation, strong tech talent, and a unique entrepreneurial spirit. The country’s tech sector accounts for 18 percent of its GDP.

At the same time, the world is witnessing one of the most significant technological revolutions in history: the rise of generative AI. According to a report by McKinsey, generative AI could add up to $4.4 trillion annually to the global economy. This technology has the potential to transform industries, create new job categories, democratize education, and revolutionize healthcare, making it more affordable and accessible to all.

Google's CEO, Sundar Pichai, emphasized AI's profound impact, stating, “AI is one of the most profound technologies we’re working on. It’s more profound than fire, electricity, or anything we’ve done in the past.” His words underscore the monumental changes AI is set to bring to the world.

Israel has nearly everything needed to become a world leader in AI. The country boasts incredible talent—such as Ilya Sutskever, co-founder and former CTO of OpenAI, and Dario Amodei, co-founder of Anthropic, both of whom have origins in Israel—along with a robust entrepreneurial culture and vibrant innovation hubs. The missing piece in this puzzle is sufficient financial resources.

Countries that have heavily invested in AI have seen substantial boosts in their GDP. A study by Accenture found that AI could lead to significant economic growth in the US by 2035, potentially adding $8.3 trillion in gross value added (GVA).

For Israel, strategic investment in AI could create 50,000 to 100,000 jobs over five years and add $100 to $200 billion to its GDP over the same time, following similar trends seen in other nations. This kind of growth would be transformative for Israel. Investing in AI technology is not just about economic expansion but improving lives and bolstering national security.

Education: AI can democratize education, providing high-quality learning opportunities to every child, even in underserved areas.

Healthcare: AI has the potential to revolutionize medical care, lowering costs and ensuring top-tier treatment is accessible across Israel.

Defense and Security: AI can enhance Israel’s military capabilities, from better intelligence gathering to advanced cyber defense, ensuring Israel remains at the cutting edge of military technology.

The Israeli government has recognized this need and taken initial steps, including establishing the Israeli Center for AI, showcasing its commitment to the field. Efforts are also underway to attract academic talent to Israel, helping foster a robust AI ecosystem.

However, government action alone is not enough. We, as business leaders and investors, need to step up. This is one of those rare moments where Zionism, societal impact, and capitalistic interests align perfectly. Investors can contribute to strengthening Israel’s economy, security, and quality of life while potentially reaping significant financial returns. There’s no better example of a “win-win” scenario in business.

This is our responsibility as people who care about Israel’s future and our privilege and opportunity to be part of something profoundly meaningful and impactful.

Shlomo Mirvis is a managing partner @ AI10 Ventures

Israel is tiny, surrounded by enemies and engaged in a protracted multifront war. Its conflict with the Palestinians seems inextricable. The United Nations and much of the media are immensely biased against the Jewish state, distorting public perception worldwide. Who would invest in Israeli companies today?

We would. We have dedicated our careers to Israel investing, and our reasons start with business fundamentals.

Israel consistently ranks as one of the most innovative countries in the world. Dubbed “Startup Nation,” Israel regularly scores among the highest globally for producing unicorns and in venture investments (28 times the U.S. per capita rate in 2021). It leads the world in research-and-development spending as a percentage of gross domestic product. More than 400 multinational corporations have offices in Israel. This tiny Middle Eastern country has more Nasdaq-listed companies than any other country besides China, Canada and the U.S.

The general economic environment in Israel is also supportive of investing. Israel has a growing population with the highest fertility rate in the Organization for Economic Cooperation and Development. Before the war Israel’s economy was growing more than twice as fast as the U.S., China or Germany. Israel is well-regulated, with safe banks, the rule of law, support for entrepreneurship and advanced corporate governance.

The valuations of Israeli public companies are nearly 40% lower than global companies (as measured with both price to earnings and price to book). An efficient skilled-labor force full of ambitious entrepreneurs with startup expertise makes investment dollars go further than in other developed markets. Many Israeli companies are also bringing solutions to issues we care about such as healthcare, sustainability, green energy and food scarcity.

Investors look not only at the numbers but at the people, and Israel’s population has an abundance of positive qualities. Israelis are smart, direct and resilient—evidenced most recently by the relative lack of business disruption despite a major war that began with a mass call-up of reserves. The country’s population is highly diverse, with a foreign-born percentage of over 21% in 2019, among the highest in the world. 

There is room for improvement in widening the country’s labor force, but there are also encouraging trends. The number of women in tech R&D is up 130% over the past decade. Efforts to increase the participation of Arabs, ultra-Orthodox Jews and other minorities in Israel’s skilled labor force offer the potential of further boosting Israel’s long-term economic growth.

Israel is at war, and that brings unspeakable horrors. But investing in Israel fosters a strong, innovative economy, which leads to the recognition that the country is here to stay and has plenty to offer its neighbors. This was the conclusion of Egypt, Jordan, the United Arab Emirates, Bahrain, Morocco and Sudan when they made peace with the Jewish state. Israel is inching closer to a peace agreement with Saudi Arabia for the same reason.

Investing in Israel today may seem counterintuitive, but it is resoundingly attractive. The case for Israel starts with high-quality companies at low valuations and extends to social and environmental progress along with the advancement of regional prosperity. Our ultimate goal is for Israel’s success not only to benefit our investors but to bring peace, freedom and prosperity to all residents of the Middle East.

Ms. Guetta is a former chair of the Israel Securities Authority, the country’s financial regulatory body, and an advisory board member of Geshem Partners, an Israel-focused investment firm. Mr. Penn is chief investment officer of Geshem Partners.

Foreign investors sat on the fence because of the war, but they now realize that even under difficult conditions, the Israeli high-tech industry is alive and kicking. They are now seeking entry points back into the Israeli market, under conditions that can make the most of the situation and contain the risk.

The current war was the last thing the Israeli high-tech sector needed, while responding to a tense domestic political situation and global financial downturn. With the outbreak of war, many investors sat on the fence, waiting for stability. In recent months, Israel has been in a “wartime routine”, with the fighting focused in the Gaza region and parts of the north. In other areas, the economy is striving to operate almost as usual, especially in the high-tech stronghold of Tel Aviv and its surroundings. 

While it initially seemed that the war would impact investments in Israeli high-tech even further, in recent months, there has been an impressive recovery. Israeli technology continues to succeed even under difficult conditions and uncertainty. For example, in April, Israeli companies raised approximately $1 billion in 20 financing rounds – a single-month total not seen in two years. Similar amounts were also seen in exit deals this month, including acquisitions made by Nvidia. 

Such expressions of confidence bring foreign investors, especially Americans, “off the fence” and into the Israeli market under conditions that can make the most of the situation and contain the risk. Currently, we see more investors from the US choosing to invest through secondary deals (purchasing shares from other shareholders) in companies in advanced stages, for several reasons: 

Investing in mature companies lowers risk levels. Mature companies have significant revenues, and those that weathered the “dry spell” in 2022-2023 have significantly improved their capital efficiency, making them healthier financially and better able to withstand further challenges. 

Buying through secondary means ensures investors invest in promising companies at discounted prices. For entrepreneurs, employees, and well-known funds selling their stocks, it’s an opportunity to liquidate funds without waiting years for the anticipated exit, and without publicly declaring lower valuations than the last fundraising. For investors, it’s a genuine opportunity to invest in leading companies at low prices and with contained risk. 

Most mature Israeli companies are global companies. Consequently, the influence of local developments is limited, and they are more resistant to local crises. This is another opportunity for investors to contain risk. 

Short-term investments – In recent years, Israeli companies have grown into large companies with many employees. The life span of a growing private company until exit has significantly lengthened from 6 years to 15 years, and the companies are raising much more money. Therefore, investors are looking for the opposite, especially in times of uncertainty – they don’t want to be “locked” into an investment. The name of the game today is liquidity, so investors are looking for shorter-term investments: secondary deals in mature companies, closer to exit, are an excellent way for them to shorten the investment horizon. 

The Israeli high-tech sector continues to grow and prosper despite geopolitical and economic challenges. Israeli technology proves its resilience and its ability to thrive even under difficult conditions. Secondary transactions are an efficient tool for investment in this market, allowing investors to enjoy the many advantages of Israeli technology while mitigating risks.