Protego Ventures closed the country's largest defense-only venture fund to back AI, drones and autonomous systems — as Israeli startups raised $11 billion in nine months.
The hottest corner of venture capital now has an Israeli address. Protego Ventures has closed a $125 million debut fund dedicated entirely to defense technology — the largest of its kind the country has ever seen.
The timing, as the founders themselves admit, is hard to ignore. Global defense-tech venture dealmaking reached $19.8 billion in the first quarter of 2026. Conflicts in Ukraine and the Middle East, rising military budgets everywhere, and the sudden demand for autonomous systems have dragged military startups out of venture capital's specialised corner and into its spotlight. Protego's bet is that Israel — where founders iterate under real operational demands, for real frontline customers — has an unusual edge in that race.
"Protego was built on the conviction that many of the best defense companies in the world are being built right now, in Israel, under real operational demands," co-founder Lital Leshem said. Leshem brings eleven years of military and intelligence experience — she was deployed as a reservist on October 7, while pregnant, and stayed until the delivery room — plus a startup exit at $625 million in 2025. Her co-founder Moser, a veteran venture capitalist, stays on as managing partner at the generalist firm AnD Ventures. The portfolio already includes XTEND and ASIO, the situational-awareness startup partnered with Anduril.
The hottest corner of venture capital now has an Israeli address.
The fund lands in a market that is both euphoric and selective. Israeli privately-held tech companies raised $11 billion in the first nine months of 2026, up 50% from the same period last year — $3.6 billion of it in the third quarter across just 91 rounds. Cybersecurity still leads with about $4.3 billion year-to-date, 38% of the total; enterprise software has climbed to nearly 30%, its highest share since 2020. But defense-tech, space and quantum cooled to roughly $170 million in Q3 from about $400 million per quarter in the first half — the segment is maturing from a frenzy into a market, and Protego is positioning as its institutional-grade vehicle.
The state has noticed the same shift. Israeli authorities awarded VC firms Adir Capital and Sling Capital about $33 million in state guarantees to invest in military and dual-use technologies — a public-private pipeline for the war economy. Protego, Leshem said, was too far along in its own fundraising to take part in the tender. The signal cuts both ways: the government is now a co-investor in the defense-tech boom, which de-risks the sector — and also stamps it as strategic, with all the export-control strings that implies.
What comes next is scale. Protego is already planning a second fund for the first quarter of 2027, anchored by Israeli institutional investors and one large American commitment Leshem says is secured, with a mandate widening to early-growth US defense-tech companies. The ambition is plain: to build the bridge between Israel's battlefield-iterated startups and the Pentagon's procurement budgets. In venture capital, $125 million is a statement of intent. The second fund will be the test of whether the intent becomes an institution.
Western coverage — TechCrunch, startup press — frames Protego as the institutionalisation of a boom. The narrative is financial: defense tech has graduated from a niche to an asset class, Israel has the dealflow, and a dedicated fund is the market's natural next step. The West's eye is on the numbers — $125 million, $19.8 billion in Q1 — and on the founder story, which venture loves: a reservist-founder who lived the thesis.
The Western lens also notes the American angle with approval. A second fund courting US institutional money and targeting American defense-tech companies is read as the Israel-US innovation alliance formalising itself — in this telling, the fund is as much a geopolitical instrument as a financial one.
Eastern coverage — Russian and Chinese tech commentary — reads the fund as the financialisation of permanent war. The narrative is cold: venture capital has discovered that conflict is a growth market, Israel is its laboratory, and $125 million is the seed round of a military-industrial complex 2.0. In this telling, "iterating under real operational demands" is a euphemism for battle-testing products on live battlefields.
The Eastern lens dwells on the export-control shadow. A state that guarantees VC bets on military tech, in this reading, is building an arsenal with cap tables — and the customers for AI drones and autonomous systems are not only the democracies the marketing decks name.
The Global South lens — African and Asian tech press — reads Protego with ambivalence. On one hand, the admiration is real: a small country building a world-class innovation pipeline from its own constraints is the story every emerging tech ecosystem wants to tell. On the other, the products are weapons, and the South has historically been where other people's weapons get tested.
What interests the South, in this telling, is the dual-use spillover. Israel's military R&D has repeatedly seeded civilian industries — cybersecurity, semiconductors, navigation. The South will be watching whether Protego's AI, sensors and autonomy bets produce civilian dividends, or whether the fund's returns stay on the battlefield.
