Israeli defense-tech startups developing attack drones, defenses against fiber-optic drones, and munitions of various kinds have become the pride of the Israeli industry as the fighting dies down. Up to now, however they have mainly interested foreign investors: funds such as Lux Capital, Sequoia, and Peter Thiel’s Founders Fund have invested in prominent companies in the sector such as Kela and Covenant. Few Israeli investors have invested in them, other than new, small funds such as Protego Ventures, Kinetica Ventures, Aurelius Capital, and 10D. According to research firm IVC, only 0.5% of the total amount of capital invested in Israeli startups has gone to Israeli defense-tech companies.

A new Israeli venture capital focused on the sector, founded by Israelis who previously managed family offices, was unveiled yesterday. So far it has made five investments under the radar in young Israeli companies. The fund, Stratos Ventures, has raised $50 million out of a target $80 million from an anchor investor - a British financial institution - and former senior figures in defense establishments in the US, Latin America, and India.

The fund promises entrepreneurs considering founding companies in the sector, and those who have already taken their first steps, access to the US Department of War, the US Defense Advanced Research Projects Agency (DARPA), US Central Command (Centcom), and private US defense funds. The fund has a partnership with startup accelerator The LAB Miami, among the founders of which is Israeli Ayal Stern.

Among the fund’s partners and advisors are a former head of the CIA who has not been named, Lieutenant General (ret.) Michael Barbero, a four-star general in the US Army who commanded the legendary 101st Airborne Division, and Theo Williams, former head of portfolio development at Salesforce Ventures.

Companies with an Israeli connection

The fund was founded by three Israelis working in defense investment in family offices and funds. Rotem Yehuda Kakon served in elite IDF technology units and headed Consensus Business Group, a UK family office managing $1.2 billion in assets. He was one of the early investors in defense fund AWZ and in Israeli emergency communications platform Carbyne, which was sold to US company Axon for $625 million. Between 2014 and 2019 Kakon was bureau chief for the minister of the economy and the minister of environmental protection. He currently serves as a director of Xenia Venture Capital and Earth and Beyond Ventures.

Kakon was joined by Aviad Grinfeld, an experienced CFO and former CEO of Avnon Holdings, which also invested in defense companies, and Daniel Fouzailov, a former partner in Paz Capital, an Israeli family office.

Stratos focuses on investment in companies in the pre-seed to seed stages with Israeli founders or a substantial connection to Israel. The intention is to invest $2-4 million each in 15-20 companies.

Published by Globes, Israel business news - en.globes.co.il - on June 25, 2026.

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