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Welcome back! Elon Musk may be the busiest dealmaker right now. This Tuesday, his SpaceX rocket company said it had an option to buy coding startup Cursor for $60 billion. That would be the biggest venture-backed acquisition—other than SpaceX’s February purchase of his startup, xAI, for what Musk has said was a $250 billion valuation. Outside the Musk-verse, by contrast, tech bankers have been complaining about how slow dealmaking is—particularly in software, where executives seem paralyzed by the rapid-fire releases of competing Anthropic and OpenAI features. (One software banker even mused that this is the quietest time of their entire career.) One place, however, is bucking the trend: Israel. Earlier this month, we reported that cloud provider Nebius had been in talks to buy Israeli AI lab AI21, which develops large language models and systems for enterprise agents. (Such a deal would follow Nebius’s agreement in February to buy another Israeli startup, the AI software firm Tavily.) Within the same week, we reported Cisco was in talks to acquire Israeli AI agent security startup Astrix Security for up to $350 million. If these deals happen, they will add to a string of high-profile sales of Israeli startups. The most notable in the last year was cloud security startup Wiz, which sold to Google for $32 billion in March. The Wiz sale stood out for its size, since many Israeli startups sell when they’re still valued below $1 billion. But other deals illustrate the fact that while the country’s entrepreneurs are known for launching cybersecurity startups, they have also been busy leading startups in software, AI and chips. And now some of those are getting attention from buyers. In December, for instance, ServiceNow agreed to buy Israeli cybersecurity startup Armis for $7.75 billion. In January, Apple agreed to buy Q.ai, an Israeli startup that uses facial micro-movements to interpret speech, for close to $2 billion. And last week, publicly traded Credo bought Israel’s DustPhotonics, a startup in the emerging semiconductor field of photonics, for up to $1.2 billion. “Israel is always known as a sort of cyber nation, and that’s definitely true,” said Itay Inbar, a partner at New York and Tel Aviv-based venture firm Greenfield Partners, which invested in DustPhonics. “But to a large extent, it’s always been a semiconductor and infrastructure nation as well.” In the future, investors in Israel expect to see more M&A transactions for AI startups, given that the number of AI startups has proliferated in recent years. Maor Fridman, a general partner at Israeli VC firm F2, who mostly invests in seed-stage startups, notes very few Israeli companies are trying to build new foundational AI models. Instead, they are focusing on specific AI applications and the infrastructure that makes AI cheaper, faster and easier to run. These AI startups could be acquisition targets in the future, Fridman and other investors said. At the same time, the rise of AI could make Israeli cybersecurity startups even more attractive as companies develop tools to secure AI agents building and operating applications on behalf of users and ways to quickly patch future security risks that AI models can find quicker than ever. “We’re going to shine in the same areas that we’ve done in the past, and where the world needs so clearly, which is building towards AI,” Oren Yunger, an Israeli venture capitalist who’s now a managing partner at Notable Capital, which has invested in Israeli security startups like Torq and Token Security. “I would imagine we're going to see a lot more M&A in the world of AI,” Yunger said.
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