2025 was characterized by an acceleration of technological regulatory trends that directly impacted the work of commercial lawyers and corporate decision-making. Amid geopolitical tensions, pressure on public systems, volatile markets, and maturing AI technologies, the corporate playing field became even more complex: regulation, taxation, intellectual property, collaborations with state entities, and transaction structures all demanded renewed scrutiny.
Innovation in Uniform: The Rise of Defense Tech in Israel
In 2025, Israel’s defense-tech sector transitioned from a niche field into an emerging industry regarded as a strategic asset. Following various conflicts around the world in recent years, and particularly Israel’s Swords of Iron War, technological gaps on the battlefield were exposed, sparking interest from entrepreneurs and investors. During the past year, there has been significant growth in ventures developing innovative technologies tailored to security and military needs, alongside a substantial rise in sector investment. Many of these ventures are driven by reservists with firsthand knowledge of battlefield needs and prior technological expertise.
Leading technologies in the defense-tech sector today include artificial intelligence, autonomy, and robotics, aimed at developing smart military systems that integrate human forces with autonomous tools for both physical combat and cyber warfare. Alongside the sector’s success, defense-tech companies face complex regulations, including export control oversight by the Defense Export Control Agency (DECA) and intellectual property protections, which complicate day-to-day operations. In 2026, we anticipate a balance between innovation and national security in defense-related developments, particularly regarding patent registration in Israel and abroad, while taking into account the state’s rights in ventures developed within the framework of military service.
“The Next Cyber Technology Will Focus on the Mind”: Traumatech and the Emergence of a New Tech Field
In 2025, against the backdrop of geopolitical tension and war, the need for mental health care and trauma treatment increased worldwide, particularly in Israel. There is also a growing recognition that the mental health market is not merely a social challenge but also an entrepreneurial, economic, and technological frontier. Within this context, the trauma-tech field gained momentum, driven by rising demand for post-trauma diagnostic and treatment solutions, alongside existing gaps in healthcare systems. The combination of technology and mental health is producing advanced solutions—telemedicine apps, augmented reality, artificial intelligence, and interactive remote therapies—with enormous economic potential, with market valuations projected to reach USD 566 billion by 2032.
At the same time, because this involves human lives, it is crucial to ensure clear boundaries for these technologies so that they are applied appropriately and do not replace the professionalism and empathy required in mental health care. AI-integrated solutions should therefore be limited, include emergency mechanisms connecting users to a human therapist immediately, be subject to strict oversight and clear policies, comply with rigorous privacy and data security standards, uphold therapeutic ethics and patient rights, and follow early and stringent regulation for their use.
New Ruling on Employee Stock Options: Relying on Good Faith May Create Financial Exposure
Stock options remained a key remuneration tool in 2025, especially in startups. However, recent court rulings clarified a salient point that many employers tended to disregard: even when employment agreements stipulate that an employee’s eligibility for stock options is contingent upon board approval and suspending conditions, the employer’s actual conduct may render such conditions ineffective if tainted by mala fides.
Israel Innovation Authority Grants: Easy Money with Costly Obligations, Mainly Transactional Restraints
In 2025, many companies considered Israel Innovation Authority grants an essential financing tool. At the same time, investors and buyers increased their focus on the downsides of these grants: operational limitations, reporting obligations, and conditions that could adversely impact exit strategies. Key obligations included designated use; recognition of approved costs only; periodic reports often requiring CPA certification; commitment to the Israeli economy (including R&D in Israel and manufacturing in Israel, usually for a period of five years unless granted special approval); intellectual property and technology transfers (including royalty payments until the principal of the grant, interest, and linkage are fully repaid); and restrictions on sales, transfers, and exclusive licensing without prior written permission.
The key takeaway is this: When companies receive a grant, there is effectively a “regulatory partner” to their business. Thus IIA requirements must be incorporated into group structure planning, shareholder agreements, and exit strategies from an early stage.
Next Insurance Sold to Munich Re: Strategic Transactions
The acquisition of Next Insurance for about USD 2.6 billion by Munich Re (represented by our firm) reflects a prominent trend in 2025: acquisitions by existing strategic investors, particularly in sectors that experienced declines in value in 2022-2024.
This transaction also highlights several corporate insights:
- Companies holding data-driven AI platforms (rapid underwriting and precise matching) retain value even when the capital market cools, especially if they demonstrate significant operational scale.
- The entry of strategic investors (such as major insurance companies) into late funding rounds often signals preparation for an acquisition and not merely a financial investment. The takeaway is this: companies must meticulously examine information, controlling rights, ROFR, option structures, and exit mechanisms already at the investment stage.
Summary and Looking Ahead to 2026: Law Is a Strategic Tool for Generating Value
2025 marked the shift of legal counsel from a reactive position to one of proactive strategic planning, a trend expected to become a binding standard in 2026. The complexities observed this year—from the evolution of defense-tech and dual business models into strategic assets requiring strict management of export controls, to the growth of the traumatech sector where compliance with AI and privacy protection regulations are prerequisites for operations—demonstrate that regulatory compliance has become a critical business-financial variable.
Looking ahead to 2026, companies and management teams must adopt a proactive approach on several fronts:
- Management of transactions and fundraising: The lesson learned from recent strategic transactions, such as the acquisition of Next Insurance, is that investors are looking for data-driven AI platforms, but only those backed by strict management of legal risks. In 2026, buyers and investors will include regulatory exposures in their pricing and demand more complex indemnification and liability mechanisms if they involve the use of AI in the healthcare and insurance sectors.
- Exit path planning: Considering that IIA grants impose considerable obligations and heavy restrictions on transfers of know-how and manufacturing abroad, companies should treat the IIA as a “regulatory partner” from the early stages of planning their group structures to avoid obstacles in future transactions.
- Corporate governance and remuneration: The recent ruling on employee stock options shows that “good faith” will not be merely an abstract concept in 2026, but a principle that could create direct financial exposure to employers, requiring them to ensure their employment agreements are meticulously worded and their conduct toward employees is transparent.
The bottom line is that organizations must include legal considerations (such as controlling rights in investment rounds and restrictions on R&D and manufacturing) as an integral part of their business models in 2026.
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Adv. Ken Shaked is a partner in our firm’s High-Tech Department.
Barnea Jaffa Lande’s High-Tech Department is one of the leading practices in its field. The department represents high-tech companies and startups from the fintech, life sciences, advanced technologies, AI, cybersecurity, and privacy protection sectors, advising on capital raisings and other complex transactions. It places a strong emphasis on innovation and provides ongoing legal counsel to both Israeli and foreign companies. The department is consistently recognized by leading local and international legal directories, including individual rankings of its legal team.