A new report from Fusion VC, an Israel-based venture capital firm, points to both resilience and growing concentration within Israel’s early-stage startup ecosystem amid ongoing regional instability.
According to the firm’s 2025 Pre-Seed Investment Landscape Report, valuations for the most competitive pre-seed startups rose 17% year over year, reaching an average of $13.5 million. The increase reflects intensifying competition among investors for top-tier deals, particularly in sectors such as artificial intelligence and cybersecurity.
Amid geopolitical uncertainty, fewer venture capital funds and angel investors are actively participating in pre-seed rounds, with participation declining by 10% and 25%, respectively. However, those who remain active are making more investments, with deal activity rising by 25%, signaling continued confidence in Israel’s innovation pipeline.
The report also assessed the growing use of AI tools that enable founders to build products faster and with fewer resources, helping drive the rise of so-called “solo entrepreneurs” supported by angel investors.
Nearly two-thirds of venture capital firms—while still overwhelmingly backing team-led companies—now expect a working product before investing, and more than half expect portfolio companies to raise a follow-on seed round within six to 12 months, a timeline that has doubled compared to last year’s expectations.
“The message is clear: investors want proof that teams can reach the market—and fast,” said Amit Shechter, principal and head of Fusion Israel, who led the report. “In an era where an initial product can be built with limited resources, often without any external funding, we are seeing more investors expect early evidence that founders know how to sell, not just build technology.”
The report indicates that the focus has shifted from product depth alone to a team’s ability to differentiate in a crowded market.
“Therefore, even before a pre-seed round, teams should ask themselves not only what they are building, but how they will reach their first customers, and what measurable signals they can present to stand out in a dense and competitive landscape,” he added.
The annual Pre-Seed Investment Landscape Report is based on data from 37 venture capital funds and 33 angel investors, covering more than 165 unique deals.
