December Edition 2025 IsraelDesks Presented by In Partnership with
In a year marked by volatility and complexity at home and abroad, one theme continues to define Israel’s business community: resilience with purpose. Even amid uncertainty, Israeli companies are pushing forward — innovating, expanding, and contributing meaningfully to global markets, regulatory debates, and the economic landscapes of the countries they touch. This forward-looking momentum is shaping not only Israel’s next chapter, but the sectors and jurisdictions where its entrepreneurs and investors operate. This edition brings together leading voices from across our network to explore these dynamics, beginning with Israel’s defense-tech moment. Record export levels, accelerated R&D cycles, and rising worldwide demand for battle-tested technologies underscore a sector moving confidently into new strategic territory. With insights from Pillsbury, A&O Shearman, Pearl Cohen, Shibolet, and ERM, we examine the opportunities and challenges as Israeli innovators scale internationally and engage more deeply in global security and industry conversations. We also spotlight New York City as our Jurisdiction feature, with contributions from Herrick Feinstein, Chapman and Cutler, Fox Welcome to the latest edition of IsraelDesks magazine. Rothschild, Kobre & Kim, all discussing the future of this city for Israeli companies, while we also examine U.S. regulatory shifts — from Carter Ledyard on cybersecurity enforcement to Sheppard Mullin on the new H-1B Executive Order. We take a dive into Israel’s sweeping tech tax reforms, where Herzog Fox & Neeman, EBN, and Shibolet outline how new rules are creating clarity for multinationals, venture funds, and returning talent — reducing friction and enabling long-term planning in an ecosystem built for growth. Another key feature in this edition is the global rise of trade secrets. Attorneys from Pillsbury, Greenberg Traurig, and Fox Rothschild provide a worldwide view of evolving laws, the convergence of cybersecurity and confidentiality, AI-driven risks, and the expanding reach of U.S. enforcement. For Israeli companies abroad, robust protection is now a strategic asset. As always, we welcome your contributions and insights as we grow this global community. Lee Saunders Editor
Recent Market Trends » Global Prespectives on Trade Secrets ....................................................26 » Israel’s Tech Tax Reform ........................................................................34 » CLM | Cybersecurity Risk Managment Enforcment Pendulum Swings......42 » Sheppard Mullin | Shifts in H1-B Policy...................................................48 Jurisdiction in the Spotligh: New York City ............................04 Sector in the Spotlight: Israel’s Defense-Tech Moment .............14 Table of Contents 04 14 26
4 Jurisdiction in the Spotlight New York City
5 As New York heads into a new political era, the prospect of a Mayor Zohran Mamdani is prompting Israeli businesses and investors to reassess both the risks and the rewards of the city. A platform focused on rent control, progressive taxation, and tighter scrutiny of landlords and financial institutions could reshape the regulatory and commercial environment that has long underpinned Israeli real estate, credit, and capital markets activity in the city. Yet even as policy debates intensify, the fundamentals that made New York a natural beachhead for Israeli companies remain firmly in place: unparalleled access to capital, dense professional networks, a deep and diverse talent pool, and a Jewish and Israeli business community that functions as a readymade ecosystem. In this context, the question is not whether New York will remain relevant for Israeli entrepreneurs, but how they can adapt to a shifting landscape while continuing to leverage the city’s strengths. For this issue of IsraelDesks Magazine, we focus on a city that never leaves the spotlight — and the home of our new U.S. office: New York. Attorneys from leading U.S. firms share why the city remains central to Israeli business and what founders, investors, and corporates should consider amid an evolving political and regulatory landscape. New York: An Essential Gateway for Israeli Companies Yariv Ben-Ari, Herrick Feinstein: “New York remains the heartbeat of international business in the United States. For Israeli investors and companies, it offers not only access to capital and opportunity, but also access to world-class talent and a community that understands their drive and ambition. At Herrick, we are proud of our strong relationships with the Israeli business community and that we facilitate international business opportunities. We’ve seen first-hand how Israeli entrepreneurs thrive here by building meaningful partnerships, accessing diverse markets and shaping the city’s next generation of growth.” That combination of capital, community and connectivity is echoed elsewhere. Jurisdiction in the Spotlight: New York City
6 Guy Ben-Ami, Carter Ledyard: “Most international companies leverage financing opportunities in the United States. With New York as the financial center situated with many large and small financial institutions, private financing, and wealth, and continued increased venture capital available, it is the first location for corporate finance and capital markets. Central to successful business is the vast networks throughout New York City’s industry and financial hubs, enabling multiple in-person meetings in a consolidated area accessible by subway! The price of real estate tends to be higher in any densely populated city, but nowhere else in the U.S. offers the ease of access and quality of financial networks than New York. Israeli companies continue to relocate to New York to access markets here: there are more Israeli companies in New York stock exchanges than any other country after the U.S. New York is also the traditional home to the largest Jewish community in the world outside of Israel, so the network for connecting business, finance and support all lie within a short distance in and around New York. It is the symbolic and literal hub of international business.” “Unique Combination: Global Reach, Easy Access to Capital, and Diverse Talent Pool” Ariel Yehezkel and Allison Troianos, Sheppard Mullin: “New York has a unique combination of global reach, easy access to capital, and diverse talent pool. With a large consumer base and an extensive professional network, New York has an active startup community and attracts well-connected investors, many of whom are already familiar with Israeli innovation. Business moves quickly in New York, and established connections, especially within the Israeli community, can make it much easier for companies to gain a foothold and grow.” Michael Friedman, Chapman: “New York has always and continues to be a key financial hub in the United States and globally. Israeli companies, whether they are looking for investors or looking to make new investments, have gravitated to New York as a financial hub to facilitate their transactions. New York, especially when it comes to real estate, feels more familiar, comfortable, and accessible to Israeli investors. By virtue of its important position as a global financial hub, most, if not all, global law firms have a significant presence in New York which has become more important to Israeli companies as they have grown larger and their transactions more complex.”
7 In a future Mamdani administration that may seek to recalibrate the balance between capital and community, these structural advantages – capital flows, networks, familiarity, and legal infrastructure – remain the core reasons Israeli companies continue to choose New York. Tech, Life Sciences, and the Growth Sectors Drawing Israelis Beyond finance and real estate, New York’s surge in technology and life sciences is opening new doors for Israeli innovators – sectors that will be closely watched if a more interventionist City Hall emerges. Guy Ben-Ami, Carter Ledyard: “Between business groups, trade organizations, and corporate finance, tech and life sciences have been on a huge upswing in New York. While other U.S. cities indeed have their tech corridors (e.g., Charlotte, Boston, Silicon Valley, Austin), New York is where to find the important capital markets that are required for growth that brings success and prosperity to any company. The New York state university system, particularly upstate in the Albany-Rochester-Rensselaer triangle has invested millions of dollars in the expansion of research and development, where for decades companies have settled knowing a short train ride to New York City and Wall Street are at arm’s length.” “Exciting Opportunities for Israeli Companies” Ariel Yehezkel and Allison Troianos, Sheppard Mullin: “There is significant momentum behind tech and life sciences investment in New York right now, which is creating exciting opportunities for Israeli companies. We are seeing both private equity and venture capital increasingly directed toward sectors where Israeli startups excel, such as cybersecurity, fintech and healthcare. In addition, local institutions such as universities, medical centers, incubators, and accelerators are offering new paths for collaboration and helping companies enter the market more easily.” Tobias Moon, Chapman: “The tech surge is creating an ecosystem of founders and capital creating new opportunities for Israeli companies coming to the U.S.”
8 Tamar Gubins, Fox Rothschild: “New York is home to tech sector communities in which Israeli companies are concentrated, including in AI, cybersecurity and FinTech, and there is significant VC investment in New York tech companies. In the last five years there has been a substantial increase in the number of Israeli founded startups in New York City. For Israeli startups, establishing even a small presence in New York provides access to capital, strategic partners, and customers in the U.S. market.” Regardless of who occupies the Mayor’s office, these sectoral ecosystems – capital, universities, hospital systems, and a dense startup community – are likely to remain central to New York’s appeal for Israeli founders. Regulatory and Commercial Hurdles: What Israelis Must Navigate With a potentially more activist city administration on the horizon, understanding existing legal and regulatory complexity becomes even more critical for Israeli businesses. Ariel Yehezkel and Allison Troianos, Sheppard Mullin: “Founders may encounter a range of legal, regulatory, and commercial challenges when establishing or scaling their businesses in the U.S. Although the specifics can vary by industry, the process typically involves navigating complex laws at the federal, state, and municipal levels, each of which may have unique requirements. Immigration and visa compliance is often one of the earliest and most critical considerations, with options such as the H-1B for skilled workers and the L-1 for intracompany transfers, presenting complicated requirements, lengthy processing times and evolving regulations. These factors can significantly impact a company’s ability to hire the talent necessary for its U.S. operations. For businesses involved in importing goods or purchasing equipment internationally, understanding U.S. tariff policies is essential for effective planning and managing overall costs. Forming a U.S. entity and securing a federal Employer Identification Number (EIN) can also pose challenges, as the procedures for appointing directors, officers, and preparing governance documents often differ substantially from those in Israel. Additionally, it is vital for founders to familiarize themselves with local employment and tax laws since these can be complex and differ
9 markedly from Israeli practices. Commercial matters such as negotiating leases, structuring contracts, and protecting intellectual property should be approached with an understanding of U.S. legal standards. Engaging local advisors who have experience assisting Israeli companies in the U.S. is highly recommended, as their expertise can help navigate these processes more efficiently and effectively. By planning carefully and staying informed about changing laws and regulations, Israeli entrepreneurs can better overcome these hurdles and set their businesses up for success in New York.” Tobias Moon, Chapman: “Navigating the complex web of federal, state and local regulators is one of the biggest challenges Israeli companies face when doing business in New York. After deciding to enter the US, Israeli founders need to engage a law firm like Chapman with strong regulatory ties.” Udi Karlinsky, Kobre & Kim: “Doing business in New York presents several key challenges for Israeli companies that differ significantly from what founders may be used to in Israel. Firstly, the U.S. regulatory environment is more complex and less forgiving. Companies are expected to be fully transparent and cooperative with regulators, and failure to meet those expectations can lead to substantial penalties, as illustrated by the high-profile settlements reached by several Israeli financial institutions with U.S. authorities over the past decade. Drawing on multijurisdictional experience and the insights of former U.S. prosecutors and regulators, Kobre & Kim helps clients navigate this landscape by managing exposure, maintaining credibility with authorities, and developing investigative, enforcement, and defense strategies that protect client interests across borders. Secondly, Israeli founders are often surprised by the high cost of U.S. legal services compared to those in Israel. To manage this, it is essential to work with firms that offer flexible and creative fee arrangements. Kobre & Kim frequently tailors its structures, through phased engagements, alternative fee models, or partnerships with legal finance providers, to align incentives, control costs, and ensure adequate representation. Finally, the U.S. legal market can appear crowded and homogeneous, making it difficult for foreign founders to distinguish between firms. Kobre & Kim’s conflict-free model allows it to act against major industry players and institutions without the constraints of competing business interests. The firm’s practice is deliberately narrow, focusing on complex cross-border disputes that often involve some combination of distressed situations, financial crime, asset recovery, and judgment enforcement, and provides
10 clients with targeted, experience-driven solutions. For Israeli founders entering or scaling in New York, success often depends on partnering with advisers who understand both legal systems and can bridge the Israeli and U.S. regulatory landscapes while offering pragmatic, commercially minded guidance aligned with business growth.” Tamar Gubins, Fox Rothschild: “Israeli founders often face challenges aligning U.S. corporate, tax, and employment structures with their existing Israeli entities. Understanding the expectations of U.S. investors — from Delaware incorporation to governance standards — is key. Early engagement with experienced cross-border counsel can prevent costly restructuring later and help founders present themselves as as ‘U.S.-ready’ from day one.” In a context where a Mamdani administration might amplify enforcement priorities at the city level, these comments underscore the importance of anticipating complexity rather than assuming continuity. AI, Data Privacy, and a Fragmented Compliance Landscape Julia Kadish, Sheppard Mullin: “The evolving patchwork of state AI and data privacy regulations are adding to the complexities and uncertainties that all businesses are facing. These laws are forcing founders to think beyond just launching a product or service and getting it afloat. From the outset, founders are having to consider AI and privacy compliance as not just a legal checkbox, but as part of the core business function. Strong data stewardship is more critical to many companies at a much earlier stage than we’ve seen historically. Missteps in how personal information is collected or used can cost more than just fines – they can break user trust and stall growth. Companies that are new and disruptive, that fit into critical infrastructure, or that have the ability to scale quickly through AI face just as many of the same cyber threats that blue-chip companies do, but often with less time and resources to invest into cybersecurity readiness.” Tobias Moon, Chapman: “State-specific privacy statutes and regulations are increasingly becoming moremore important to Israeli founders, making it more difficult to share consumers’ private information and easier for consumers to stop tracking consumers online. Because AI and data privacy regulations differ from state to state, it creates a patchwork of laws and increases compliance burdens and costs for companies.”
11 Odia Kagan, Fox Rothschild: “The privacy and AI regulatory and enforcement scene in the U.S. is fast growing and becoming more complicated. When coming to the U.S., you are increasingly facing multiple overlapping and complex laws that are hard for companies to sift through. What works for you in Israel, or even in the EU, is, in many cases, not sufficient in the U.S. The regulation of AI has made this even more the case, as companies onboard AI features and vendors, which can create or increase risks for their operations. In addition, there is often the risk of private right of action and even complaints from competitors. In New York, obligations for businesses have also increased in complexity. Here are some examples: If you use biometrics in your retail establishment, you need to provide a specific notice.If you are an employer and use AI in connection with hiring, you are subject to a number of obligations, including disclosure and a third-party audit. If you process information of individuals under 18, the New York Child Data Protection Act puts strict limitations on the nature of the use, and it needs to be ‘strictly necessary’ for the purpose. If you process health data, with the entry into force of the New York Health Information Privacy Act, you will need specific permission to use health information. With these changes, the assumption that used to be true to a large extent – namely, that you are under the radar and can deal with your privacy compliance later – is no longer true in many cases, as regulators are ramping up enforcement and joining forces to coordinate multistate action. Consumers and business clients are also becoming increasingly demanding and sophisticated. This is leading companies to turn to expert advice and to sort out their data and AI governance at an earlier stage.” Real Estate, Hybrid Work and Capital Flows New York’s commercial real estate market – often a focal point for Israeli capital – is also in flux, shaped by hybrid work patterns and valuation pressures that any new administration will inherit. What does the shift in commercial real estate and hybrid work mean for Israeli businesses expanding into New York? Lee Weiss, Sheppard Mullin: "Recent changes in real estate and work culture present both opportunities and challenges for Israeli businesses expanding
12 into New York. The widespread adoption of flexible office arrangements and hybrid work models has made it easier for international companies to establish a presence, as office leasing is now more accessible and adaptable. Israeli companies can take advantage of smaller office spaces, since not all employees require a physical workspace every day. Additionally, the expectation for impressive, in-person meeting spaces has diminished, while simply having a New York address can help bolster a company’s credibility, even with a modest footprint. However, these shifts also may require an updated approach to attracting and retaining talent. Companies may need to reevaluate their culture, benefits and policies to align with new expectations regarding remote and flexible work environments." Michael Friedman, Chapman: “The shift in real estate has provided Israeli financial institutions and credit funds with a wealth of opportunities to acquire stressed or distressed real estate properties in all categories (multifamily, commercial, retail), make acquisition, construction, and other loans and investments with local non-bank partners in New York, and for U.S. based companies – many located in the NY area – to raise funds by issuing bonds on the Tel Aviv Stock Exchange.” Deal Activity and Market Confidence Ultimately, the best indicator of New York’s ongoing appeal for Israeli business is found in actual transactions and market activity. Ariel Yehezkel and Allison Troianos, Sheppard Mullin: “We have recently seen a wave of activity with Israeli clients coming into New York, whether through M&A deals or venture capital financings in the tech, AI and cybersecurity space. There is also a steady flow of joint ventures between Israeli healthcare and medical tech firms and New York healthcare institutions, as well as strategic partnerships in the fintech space. On the real estate side, companies are acquiring flexible commercial properties geared toward hybrid occupancy, and startups are looking to ensure their AI and privacy practices are compliant with New York’s evolving regulations. All of these transactions point to a mounting confidence and a growing sophistication in how Israeli businesses approach the New York market.” Michael Friedman, Chapman: “Chapman has had a very active year thus far in multiple areas. The firm has represented indenture trustees in connection with the issuance of bonds backed by U.S. real estate and traded on the Tel
13 Aviv Stock Exchange, and has represented Israeli financial institutions and credit funds in connection with real estate–backed loans. Chapman has also advised Israeli financial institutions on the formation of new investment funds and worked with Israeli FinTech companies on the introduction of financial products in the United States. Additionally, the firm has represented Israeli bondholders in the restructuring of real estate–backed bonds traded on the Tel Aviv Stock Exchange, and Israeli credit funds in connection with the enforcement of remedies under their loan and security agreements.” Tamar Gubins and Odia Kagan, Fox Rothschild: “Fox’s Israeli clients span sectors including energy, biotech, manufacturing, pharmaceuticals, technology, and intellectual property. Many have expanded significantly through the establishment of base operations in New York and other key U.S. markets. These clients are attuned to market demand and have strategically partnered with investors and private equity firms focused on innovative, growth-stage startups aiming to leverage New York’s expansive customer base. Some clients enter the U.S. market through partial or full acquisitions of technology or manufacturing companies, engaging our firm to navigate U.S. corporate structures, closing processes, and tax implications. Overall, Israeli founders and startups have experienced an uptick in capital inflows and funding activity. U.S. investors and venture capital firms are increasingly eager to participate in these funding rounds when Israeli companies commit to establishing a U.S. presence and prioritizing scalability.” For all the political and regulatory questions that a future Mamdani administration may raise, these insights point to a consistent reality: New York continues to function as both a testing ground and a springboard for Israeli innovation and capital. The city’s depth of markets, legal infrastructure, sector ecosystems, and community networks still draw ambitious founders and sophisticated investors. For Israeli businesses, the challenge is less about whether New York remains attractive, and more about how to prepare for an environment where regulatory scrutiny, privacy and AI governance, and social priorities are intensifying. Those who invest early in compliance, governance, and local partnerships are likely to find that New York – even under shifting political winds – remains one of the most powerful platforms in the world for turning Israeli innovation into global impact.
14 Sector in the Spotlight Israel’s Defense-Tech Moment
15 In this edition of IsraelDesks magazine, we turn the spotlight on one of Israel’s most vital and influential sectors: defense technology. Beyond the headlines of billion-dollar exports and record-breaking contracts, this sector reflects the ingenuity, urgency, and adaptability that have long defined Israeli innovation. From missile shields in Europe to autonomous submarines and space satellites, Israeli companies are not only helping other nations deal with global threats, but also reshaping the conversation around defense and technology. In late 2024, Israel’s Ministry of Defense quietly announced a number that startled even seasoned analysts: more than USD14.7 billion in defense exports, another record-breaking year and a 13% jump from 2023. Missiles, rockets, and air-defense systems accounted for the largest share, and Europe was the biggest buyer. Global demand for Israeli-made systems has surged as governments seek proven, high-tech solutions such as AI-driven drones, sensors, and command-and-control platforms. The figure matters not just for its size but for what it signals. As Justin Rubin - Senior Counsel in the Washington DC office of Pillsbury, points out: “Israel is a leader in developing cutting-edge defense technology. Its defense industry is powered by world-class STEM education and driven by necessity to address constant, and constantly evolving, threats.” Anna Moshe, partner and Chair of Israel Emerging Companies & VC Practice Group at Pearl Cohen, adds: “Israel’s defense technology ecosystem is characterized by very rapid feedback from real field events (combat, drills, security events), feeding directly into R&D, prototyping and deployment. This rapid cycle gives Israeli firms a competitive advantage in developing real-world tested systems rather than purely academic prototypes, and this creates high demand for Israeli technology worldwide.” From survival to export powerhouse For a country of almost ten million people and few natural resources, the path to becoming a globally recognized defense-technology leader has been long, challenging and remarkable. The country’s defense industry was Israel’s Defense-Tech Moment
16 indeed born out of necessity. From the state’s founding in 1948, surrounding hostility meant it had to innovate to survive. What began as a domestic drive to equip the Israel Defense Forces quickly spilled outward. Over decades, a cluster of companies - Israel Aerospace Industries (IAI), Rafael Advanced Defense Systems, and Elbit Systems - grew into global names, offering everything from missiles and radars to satellites and submarines. Critical technologies continue to advance quickly and have spawned a growing number of defense-tech startups in need of support and funding. On September 15, 2025, the Israel Ministry of Defense (IMOD) Director General, Maj. Gen. (Res.) Amir Baram stated: “We are witnessing a dramatic surge in defense budgets worldwide. Global defense expenditures in 2024 reached approximately USD2.7 trillion, representing a 20% increase compared to 2023 - the most substantial increase since 1988.” He adds: “In the past week alone, we finalized agreements totaling USD2.5 billion. While confidentiality prevents me from identifying our partner nations, these governments clearly recognize the strategic value of sustained security investments in today’s volatile global landscape.” Over half of the deals with Europe; still strong in Asia Over half of the contracts signed in 2024 were concluded with European countries. In September 2023, Israel and Germany signed a €4 billion agreement for the Arrow-3 missile defense system – the largest defense export agreement in Israel’s history - with the first delivery milestone to Germany set for the end of 2025. This past October, Berlin also agreed to purchase approximately €2 billion worth of the Rafael Advanced Defense Systems “Spike missile” anti-tank missiles. In December 2024, Israel and Slovakia, signed a €560 million agreement to supply the East European country with the Barak MX Integrated Air Defense System, produced by Israel Aerospace Industries. It too was the largest defense export agreement between the two nations. In July 2025, Romania signed a €2 billion framework agreement with Israel’s Rafael to procure state-of-the-art Short-Range and Very Short-Range Air Defense systems. In August 2025, the Czech Republic received the first shipment of the four SPYDER systems from Rafael. Just one day after joining NATO, Finland announced it would procure Israel’s David’s Sling system. A November article in Reuters reported that Greece is in negotiations with Israel to purchase modern anti-aircraft and artillery systems, as part of a €3 billion multi-layer defense initiative dubbed “Achilles Shield.” According to a Defense Post article (November 14), Israel’s BlueBird Aero Systems has opened a new
17 plant near Casablanca, to produce its SpyX loitering munitions. The site makes Morocco the first country in North Africa and the Middle East, after Israel, to manufacture these drones. In Asia, India’s Defense Procurement Procedure Administration is due to meet to approve a series of defense deals with Israel worth about USD 3.7 billion – deals which include rockets for ground forces and MR-SAM air defense missiles developed by IAI with local company BDL. In November, it was announced that Elbit Systems secured a major contract with the Republic of Singapore Air Force to supply its advanced Hermes 900 unmanned aerial systems, representing a significant technological leap for Singapore. The U.S. and global partnerships While the two-year war against Hamas presented multiple challenges, Israel’s defense-tech sector continues to show momentum. Since October 7, 2023, more than a third of Israel’s defense-tech startups have been founded, marking a rapid expansion of innovation and export-ready capabilities. For buyers, Israel’s “battle-tested” technology offers credibility and immediate operational advantage, while for suppliers and investors, the market promises strong growth potential through exports, co-development partnerships, and long-term servicing opportunities. Pillsbury’s Justin Rubin adds: “Israeli companies have long looked internationally for their market, developing technology in Israel and selling it internationally. The sophistication and efficiency with which Israeli companies are looking abroad, and toward the U.S. in particular, however, has increased. The U.S. was previously a future goal for startups and now we are seeing startups thinking about the U.S. and international markets from day one. This is a positive development as early planning can position these companies for rapid growth and future success.” In the U.S., Israeli defense company UVision signed a landmark USD 982 million multi-year agreement with the U.S. Army for its advanced HERO 120 loitering munitions system - a hybrid between an unmanned aerial vehicle (UAV) and a guided missile. Reported in Globes, this contract represents one of the largest U.S. military procurements of Israeli-made drone technology. Others have followed suit. The Israeli military drone company XTEND reported it had won a contract worth tens of millions of dollars from the U.S. Department of Defense to develop and supply hundreds of AI-based drones.
18 Lior Baruch, partner at Pearl Cohen adds: “The longstanding strategic alliance and relationship between Israel and United States has created deep-rooted industrial and technological links including joint R&D, funding resources, and supply chain integration. Other countries such as the Czech Republic lately established funds to invest and cooperate with the Israeli defense industry, and are very welcome by the Israeli regulators and the large defense companies. Furthermore, recent regional diplomatic shifts, notably the Abraham Accords, have opened new defense cooperation pathways with states in the Middle East. Israel is keen to globalize its engagement in defense technology markets, for commercial and other reasons to create a wider and stable client base as well as strengthening its reputation as the provider of the best solutions in the field. Joint production schemes and technology transfers are great tools to achieve that.” Sovereignty among the challenges: “Careful planning and commitment required” Nevertheless, while the innovation and demand is there, there are challenges for Israeli companies to address - from a legal, regulatory, financial, and sovereignty standpoint. Previously an appointee in the DoD, including as the Director of the Deputy Under Secretary of the Army’s Strategy and Integration Office, Pillsbury’s Justin Rubin adds: “Despite this leadership, Israeli companies - similar to those of other allies - face challenges in entering the U.S. market. Chief among these is the U.S. bias toward developing technologies at home and having full product lines and capabilities situated in the U.S. market. The U.S., like many countries, sees this as a question of sovereignty and security and does not want to feel reliant on other countries’ technologies, no matter how reliable an ally. Israeli innovators should not be discouraged by this; it is still possible to succeed in the U.S. market and navigating the challenge simply requires some careful planning and commitment.” Justin adds: “Generally speaking, the fundamental challenge all defense companies will face when selling internationally is “sovereignty” and countries’ preferences toward developing their own sovereign industries. Layered on top of this is trade and broader regulatory uncertainty. To embed themselves fully in international markets, Israeli companies will need to demonstrate a
19 deep commitment and robust presence in the target markets, developing maintenance and manufacturing capabilities in those markets, and potentially even investing in R&D outside of Israel.” It is critical to grasp the importance of licenses. Pearl Cohen’s Anna indicates: “As legal advisors our goal is to assist Israeli defense companies in making the sale with all required licenses and permits and most importantly, as the Israeli security industry often has shorter time-to-field, we need to make sure that the Israeli companies understand and are covered as per the liabilities and exposures resulting from such shorter time-to-field factor (e.g. field testing, operational use, export risks).” Funding requires true partnership High-Tech partner at Shibolet, Einat Weidberg underlines the funding challenges. “Israel’s defense startups continue to struggle with finding funding sources, particularly in their early stages, and face challenges regarding expected exit opportunities. For many of them, their main clients are local clients, including the Israeli Ministry of Defense and the main Israeli defense corporations.” In September 2025, Israel’s Ministry of Finance and Ministry of Defense (DDR&D) proposed a USD 60 million state guarantee to establish venture capital funds dedicated to advanced defense technologies. The initiative aims to strengthen Israel’s industrial and security base, stimulate innovation, and generate jobs. It seeks to close the funding gap in high-risk defense sectors while fostering collaboration between the defense establishment, entrepreneurs, and tech firms - cementing Israel as a global leader in defense-tech. Elsewhere, VC fund, Protego Ventures, which is set to focus exclusively on investments in military technologies, secured USD70 million in investment commitments within just two weeks of its December 2024 launch. Calcalist also reported in June that another new VC fund focused on defense-tech, Kinetica, was raising USD 150 million. But while the State is now recognizing that traditional large defense corporations alone cannot sustain the country’s technological edge, Itamar Lev Eldar, partner at ERM, points out in a recent Calcalist article that this funding move addresses only the tip of a much larger structural challenge.
20 Itamar says: “Defense-Tech is among the most complex and challenging sectors for investors. It requires deep R&D capabilities, patience, and the ability to navigate stringent regulation and lengthy government procurement processes. For years, private capital has largely steered clear of the field, particularly due to uncertainty, bureaucratic hurdles, and reputational risks. Now, as nations worldwide ramp up defense spending, in response to growing geopolitical tensions, it is increasingly evident that private investment must become a part of the solution.” He adds: “The State must move from a policy of intermittent encouragement to one of true partnerships with the defense-tech ecosystem, offering startups access to tenders, regulatory certainty, and industrial backing. The government funds are a welcome start, but to create a genuine defense-tech industry, Israel needs less bureaucracy and more confidence.” Lior Baruch, partner at Pearl Cohen, points out: “While plenty of ambiguity still surrounds the structure, opportunities and challenges of these anticipated state-guaranteed VCs, we would emphasize one point to note: Compliance with Section 98 of the Israeli Patent Law, which prohibits filing a priority patent application outside of Israel for inventions with possible military or security value, with certain exceptions. Operators in the cyber sector may mistakenly assume this restriction applies only to inventions of an offensive nature (e.g. hacking tools or digital attack methods), but this is not the case. A cyber company filing a patent application in the U.S. could find itself breaching the restriction and facing criminal penalties if it does not first obtain legal clearance in Israel.” “As always in rapidly growing industries, technology develops much faster than related legislation and market understanding of such relevant legislation. Thus, we strongly recommend having experienced advisors on board in this delicate area. An honest mistake (while trying to save resources on advisors) may cost founders the trust of investors and potential clients.” Ya’ara Z. Barnoon, Special Counsel at Pillsbury added: “If the Ministry and DDR&D can shore up support for innovative defense-tech companies via guaranteeing funds that is an overall good thing. However, companies should be aware that any non-U.S. ownership stake and investment may eventually impact regulatory reviews in the U.S. and government stakes can prompt stricter reviews for companies seeking defense contracts.” Ya’ara – who previously served as Chief of Staff and senior counsel in DoD Office of General Counsel, added: “Furthermore, the Ministry and DDR&D
21 will also have certain requirements for accepting the money. Accordingly, to the extent companies are taking government backed investments we recommend they do so thoughtfully and with a full understanding of the rules around, and the impact of, the investment.” Nevertheless, defense-tech companies are targets for acquisition and investment For defense-tech entrepreneurs, the opportunities are obvious. Israeli firms are proving that small, agile countries can sell systems at the highest end of the market. The USD14.7 billion export figure shows demand is not only sustained, but rising. Shibolet’s Einat points out: “What we are currently seeing in the market is a trend where private equity funds are beginning to view defense companies as candidates for acquisition or investment with the goal of taking such companies public in the near future.” She adds: “Additionally, we are starting to see foreign companies coming to Israel to acquire startups and technology companies operating in defense sectors. A significant portion of the acquisitions we observe, whether by local private equity funds or global corporations, are strategic acquisitions, where the acquiring entity—whether a private equity fund or a company operating in the field—seeks to integrate the startup’s operations with its existing activities to create synergy and strengthen an existing business area.” Anna at Pearl Cohen explains: “There is growth funding / venture-capital rounds in Israeli defense (or dual-use) tech, the dual-use technology trend allowing Israeli companies to leverage international partnerships to scale innovation, manufacturing and commercial markets. We are also seeing strategic cross-border mergers and acquisitions of Israeli defense-tech companies. We would see direct export transactions and foreign supply-chain or production partnerships: Israel as an exporter or co-producer. We also see patent licenses limited to specific fields and territories and licenses limited to specific fields in dual use technologies. It is possible we will also see substantial state-backed or state-guaranteed fund structures in the near future.” Lee Noyek, partner at A&O Shearman, points out: The biggest defense deals in Europe last year - Rheinmetall’s USD950 million deal for Loc Performance Products and Loar Holdings’ acquisition of France-based LMB involved conventional weaponry and advanced manufacturing. But a closer analysis
22 of recent M&A transactions reveals how battlefield dynamics are reshaping the sector. A growing number of investors are targeting technology startups rather than industrial companies, reflecting that 21st century warfare is fought as much with drones and artificial intelligence as it is with warplanes and tanks. Here, Europe’s technology deficit in comparison to China and the U.S. is likely to require collaboration with foreign innovators. It is in that space that we certainly see Israeli DefenseTech playing a role.” Kela Technologies emerged as one of Israel’s fastest-growing defense-tech startups, raising USD 100 million and recently making its first acquisition: Pelanor, adding a cloud-management and monitoring platform to strengthen Kela’s broader defense-software ecosystem. The company’s modular “battlefield operating system” aims to help Western militaries integrate AI, sensors and commercial tech into existing platforms, leveraging the Israeli founder team’s experience. Commcrete secured USD 29 million in combined seed and Series A rounds to build handheld tactical SATCOM devices that convert ordinary radios into satellite-connected systems used by soldiers, special forces and first-responders. The subsectors shaping the next wave of defense innovation are already coming into focus. “AI is viewed as critical for future military operations, enabling autonomous systems, predictive analytics, and decision-support tools,” highlights Lee at A&O Shearman. He continues: “As always for Israel, rising cyber threats to critical infrastructure and military networks make cyber-defense a top priority. Autonomous Systems – these systems include, among others, unmanned aerial systems (drones) and ground robots. These systems reduce risk to personnel and enable persistent ISR (intelligence, surveillance, reconnaissance).” Anna from Pearl Cohen agrees, pointing out how “unmanned aircraft systems and counter-UAS technologies continue to advance rapidly, from drones and interceptors to human-guided autonomous platforms. Multi-layered air and missile-defense systems, such as Iron Dome, SkyHunter and Trophy APS, remain central pillars of modern defense architecture.” She also points to sophisticated sensor suites designed to protect borders, critical infrastructure and homeland security targets, alongside the software ecosystems that ensure quality, reliability and maintenance across these systems. Beyond the dominance of AI, Anna notes that a number of emerging defense technologies are quietly accelerating. Directed-energy capabilities – including lasers and high-power microwave systems – are gaining traction for “softkill” missions such as blinding sensors or disrupting electronics on incoming missiles and drones. Electronic warfare is also becoming more refined, with advanced RF sensing, passive radars, and low-probability-of-intercept
23 jammers and decoys increasingly integrated into counter-UAS and air-defense frameworks. In parallel, the space domain is opening new opportunities through low-cost optical and RF sensors and analytics designed to monitor, track or even disrupt objects in orbit. What advice would you have for a company entering the U.S. market? Pillsbury’s Justin adds: “Hire experienced legal counsel that thinks about your business needs and perspectives. This is both a legal and business point. From a legal perspective, you will be dealing with sophisticated players that are looking out for their own interests. Thus, it will be essential to understand every piece of paper you sign and its implications under U.S. law, both for B2B and B2G relationships.” “From a business perspective, it will be important to look at law as a tool and not as something to fear. Too often companies receive myopic advice that does not take their business strategy and priorities into account. Your legal counsel should be helping you see and manage risk in the most responsive and efficient way possible.” Lee at A&O Shearman, points out: “My simple answer is that this is not just (or, perhaps, even mainly about) the U.S. market. The war in Ukraine, escalating geopolitical tensions and the fraying of U.S. security support that has protected Europe since the Second World War has exposed the fragility of EU military capabilities and galvanized political will to address capacity gaps. This phenomenon is not limited to Europe but to the wider Middle East and Asia. Israeli companies need to think globally when it comes to Defense and Defense Tech, and have local depth as well as global reach as they enter new markets.” Lior at Pearl Cohen advises: “He who fails to plan, plans to fail. The Israeli ecosystem is designed to support young companies without huge resources and relying on slim teams. As compliance and market understanding are translated to credibility in the eyes of potential investors and customers, do not settle when comprising your team of advisors. Establish export control, cybersecurity, and contracting systems from day one –prior to an initial demo, and prior to hiring your first employee, especially in the U.S. This legal discipline turns what most non-U.S. defense entities see as a burden, or a technical process (“box ticking”), into a virtue signal and strategic asset: a sure way to be taken seriously by U.S. government authorities and investors.”
24 Israel’s defense technology industry is often portrayed through the lens of geopolitics. But for entrepreneurs, innovators, and investors, the more interesting story is economic and industrial. A small country has built a sector that generates over USD14 billion a year in exports, creates enduring international partnerships, and pioneers technologies. While this does not come without its challenges - licensing, politics, scrutiny - but those are the price of admission to a market that is only expanding. For those willing to navigate the complexity, the opportunities are substantial. As the Israeli MOD itself said of the 2024 results: another record year, and no sign of slowing down.
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26 Recent Market Trends Global Perspectives on Trade Secrets
27 Global Perspectives on Trade Secrets As technology accelerates and borders blur, protecting trade secrets has become one of the most pressing challenges for global businesses. With legal frameworks differing widely across jurisdictions, the need for Israeli companies expanding internationally to better understand how other markets define, enforce, and future-proof trade secret protection is vital. We asked attorneys from our member firms to share their insights into how trade secret laws are evolving worldwide, what new challenges are emerging with AI and cybersecurity, and what Israeli companies should keep in mind when protecting their most valuable information across jurisdictions. Trade Secret Laws Evolving Worldwide The global framework for trade secret protection has undergone dramatic change. Pillsbury’s Nathan Renov says: “Trade secret law has undergone a quiet but far-reaching transformation over the past decade. In the United States, the Defend Trade Secrets Act (DTSA) of 2016 created the first federal civil cause of action for trade secret misappropriation, aligning a patchwork of state laws under a single national standard. The DTSA’s reach is notably broad: it applies extraterritorially, empowers courts to issue ex parte seizure orders, and provides robust remedies for both domestic and cross-border misappropriation. By contrast, the European Union’s Trade Secrets Directive of the same year sought to harmonize national laws but did so with a greater emphasis on procedural fairness and proportionality. European courts tend to demand stronger evidence that a company has taken concrete, reasonable measures to maintain confidentiality before granting injunctive relief or damages, reflecting a more cautious and balanced approach.” “Across Asia, the picture is increasingly dynamic. China has made substantial strides in strengthening its trade secret protections, expanding definitions, increasing damages, and introducing criminal penalties to deter misappropriation. Japan and South Korea have likewise deepened their criminal enforcement mechanisms and enhanced corporate governance requirements, encouraging
28 firms to implement formal internal controls to protect sensitive information. These regional differences hold clear lessons for Israeli companies operating globally. Courts everywhere now expect companies to document the steps they take to protect their confidential information. “Reasonable measures” is no longer a theoretical standard but a practical test of compliance culture. Israeli companies must ensure their non-disclosure and employment agreements reflect local enforceability standards and that they understand how crossborder data transfers intersect with privacy and export control regimes such as the GDPR and U.S. export laws.” Jordan D. Grotzinger, Greenberg Traurig added that employee mobility rules are an often-overlooked factor. “In the U.S., employee mobility rules differ across states and evolve, which in turn affects trade secret protection. In some states, noncompete agreements are prohibited, which requires companies to place more emphasis on trade secret protection, since employees who know the employee’s confidential information can join a competitor. At the federal level, the FTC banned noncompetes last year, but that ban was enjoined and the federal prohibition on non-competes has focused on critical industries like healthcare, so that healthcare workers are not restricted from providing care. Israeli companies with business in the U.S. should be aware of whether their U.S. partners are able to enforce non-competes and, if not, ensure that those companies have other measures in place to protect trade secrets in which the Israeli companies have an interest.” Cybersecurity and Trade Secret Protection Converge Today, the line between data security and trade secret protection is increasingly blurred. Renov (Pillsbury) noted: “Trade secret protection is increasingly shaped by how courts interpret “reasonable measures” in a digital environment. Companies are expected to demonstrate formal, documented safeguards— confidentiality agreements, access controls, and internal policies—that can withstand judicial scrutiny. The convergence of cybersecurity and trade secret law has also become central: forensic data, access logs, and privacy compliance frameworks now form critical evidence in misappropriation cases. In the United States, the Defend Trade Secrets Act continues to extend federal
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