Israeli venture capital fund Fusion is launching a new investment program for defense technology startups, offering up to $2 million in initial funding and access to defense industry networks in Israel, the United States and Europe, as investor interest in military and national security technologies continues to grow.
The initiative, developed in partnership with Stratos Ventures, aims to address a funding gap for early-stage companies working on strategically important technologies that have received less investor attention than high-profile sectors such as drones and autonomous systems.
Fusion founders Guy Katsovich and Yair Vardi
(Photo: Bar Cohen)
Under the program, selected Israeli startups will receive investments ranging from $500,000 to $2 million through a Simple Agreement for Future Equity, or SAFE, a financing instrument that allows startups to raise capital before establishing a formal company valuation.
The program will also give participating founders access to Fusion’s accelerator, which provides guidance during the earliest stages of company development, including business strategy, business model development, fundraising preparations and establishing commercial operations.
Beyond financial support, Fusion said it would help startups connect with military officials, advisers, defense organizations and government agencies across Israel, the United States and Europe.
The network includes contacts associated with the U.S. Department of Defense, NATO’s Defence Innovation Accelerator for the North Atlantic, known as DIANA, and the U.S. Army’s FUZE program, which supports innovation and collaboration with emerging technology companies.
In Israel, the fund plans to facilitate meetings with major defense contractors, including Rafael Advanced Defense Systems, Elbit Systems and Israel Aerospace Industries, as well as manufacturers, industrial partners and senior defense officials.
The initiative comes amid growing international investment in defense technologies, driven by demand for advanced military capabilities, autonomous platforms and systems designed to protect critical infrastructure.
However, Fusion argues that much of the available venture capital remains concentrated in a relatively narrow range of technologies, leaving other strategically important sectors struggling to secure early-stage financing.
“We believe Israel has a significant advantage in developing defense technologies, thanks to the practical experience and unique expertise built up over the years within its defense establishment and defense industries,” said Guy Katsovich, Fusion’s co-founder and managing partner.
“However, we see a significant gap between the potential of founders in this sector and their access to early-stage capital,” he said.
Katsovich said investors have increasingly focused on popular technologies, particularly drones and autonomous systems, while overlooking other areas with substantial strategic importance.
“We want to give founders tackling complex and unconventional problems access to the funding, guidance, and connections they need to build companies that will lead the global defense industry,” he said.
The program is open to startups developing technologies across a broad range of defense-related and strategically significant sectors.
These include military systems and national security technologies, critical infrastructure protection, homeland security, data centers and computing infrastructure, industrial technologies, advanced materials, supply chains and critical minerals.
Other areas of interest include energy security, power grid infrastructure, maritime and space technologies, geospatial intelligence, Earth observation, biosecurity and climate resilience.
Fusion said it has already invested in several companies operating in these fields.
Among them is Skapion, which is developing a mobile system designed to detect, intercept and neutralize large swarms of drones.
Another portfolio company, Tenna, develops software-based solutions for spectrum intelligence and electronic warfare, while Hoopo provides tracking and intelligence systems for fleets of unpowered assets, such as shipping containers and industrial equipment.
The fund has also backed Newlight, a company developing energy infrastructure for the maritime industry.
Additional investments include startups operating in stealth mode, meaning they have not yet publicly disclosed their full operations or technologies.
According to Fusion, these companies are developing compact particle accelerators for next-generation directed-energy defense applications, new autonomous aerial systems and robotic tactile sensing arrays that allow machines to detect and respond to physical contact.
Fusion specializes in pre-seed investments, providing capital to companies at the earliest stages of development, often before they have established products, customers or significant revenue.
The fund operates an accelerator alongside its investment activities, combining financial backing with guidance intended to help entrepreneurs establish and expand their businesses.
Fusion manages approximately $50 million and has invested in about 160 startups to date, according to figures provided by the fund.
It said the combined valuation of its portfolio companies has exceeded $3 billion.
The new defense technology program represents an expansion of Fusion’s existing investment activities into a dedicated track focused on technologies with military, national security and broader strategic applications.