Israel’s largest defense VC Protego Ventures closes $125M fund to back AI, drones, and autonomous systems

Israel’s defense tech sector has a new $125 million war chest.

Protego Ventures has closed its debut fund at $125 million, giving the Israeli venture firm fresh capital to back startups building AI, drones, sensors, autonomous systems, and other defense technologies. The firm describes itself as Israel’s first and largest dedicated defense venture fund, arriving as investors pour record sums into military technology.

The timing is hard to ignore. Defense tech venture dealmaking reached $19.8 billion in the first quarter of 2026, according to data cited by Protego. Rising military spending, conflicts in Ukraine and the Middle East, and demand for autonomous systems have pushed defense startups from a relatively specialized corner of venture capital into one of its hottest sectors.

Protego is betting that Israel has an unusual advantage in that race: startups whose products can move from development into real military operations much faster than conventional defense procurement cycles typically allow.

“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, iterating according to real frontline conditions, for real customers,” Protego co-founder Lital Leshem said.

With $125M Fund, Protego Ventures Looks to Scale Battlefield-Tested Israeli Defense Tech

Protego was co-founded by Leshem and Lee Moser, who bring backgrounds spanning Israeli military intelligence and U.S.-Israel defense relations. The firm says its network reaches the U.S. Department of Defense, NATO allies, Elbit Systems, Israel Aerospace Industries, Lockheed Martin, and U.S. Army Futures Command.

Its strategy focuses on early-growth companies with working technology and customers that need capital, defense relationships, and international market access to scale.

XTEND offers an early example of that model. Protego led the Israeli autonomous robotics company’s $70 million Series B. XTEND develops the XOS operating system for controlling drones and robots and has deployed its technology with the Israel Defense Forces, U.S. Department of Defense, U.S. Special Operations Command, and allied forces. The company later went public on the New York Stock Exchange at a reported $1.5 billion valuation.

Protego’s portfolio extends beyond drones. ASIO develops navigation and autonomy technology for military operations in contested environments. Prisma Photonics uses existing fiber-optic cables as large-scale sensors to monitor infrastructure such as electrical grids, pipelines, and secured perimeters. Rilian is developing AI systems intended to capture operational expertise and apply it inside mission-controlled environments.

The portfolio points to a broader change in defense technology. Software, AI, autonomous machines, computer vision, sensors, and commercial hardware are taking larger roles in systems once dominated by traditional defense contractors and long procurement programs.

“What we kept hearing from founders was that generalist investors didn’t understand their business, and defense-focused investors didn’t understand the Israeli security ecosystem,” Moser said.

That gap is attracting more attention as governments look for technologies they can deploy on shorter timelines. For startups, winning a military contract is only part of the challenge. Selling across borders, meeting procurement requirements, securing manufacturing capacity, and building relationships with large defense contractors can determine whether a promising system becomes a global defense business.

Protego is already looking beyond its first $125 million. The firm says Fund II will extend its investment strategy into the United States, where it plans to target early-growth American defense companies.

That would put Protego into an increasingly crowded race for defense startups. Its wager is that experience inside Israel’s security and technology ecosystem gives it something capital alone cannot buy: early access to companies whose products have already been tested under conditions most startups never encounter.