Israel’s defense technology industry is currently experiencing an exceptional window of opportunity in the US market. Growing interest from investors, government agencies, and US states that support Israel, together with Israeli industry’s recent technological achievements, has made Israeli defense tech a particularly "hot" sector in the US..
With this is mind, a professional panel recently convened to examine the expansion of Israeli defense-tech companies into the US market, exploring the associated risks while focusing primarily on the opportunities and strategic considerations involved in entering the US defense sector. The panel addressed critical planning elements for US operations by Israeli entrepreneurs and companies, from the earliest stages, including optimal corporate structuring, defense and export regulations, funding, banking operations, and effective execution in the US market. The discussion was led by Advs. Dr. Ziv Preis and Gary Copelovitz, partners and Co-Heads of Technology, Corporate, and Mergers & Acquisitions practice at Lipa & Co.; Adv. Eyal Peled, a partner at the international law firm Greenberg Traurig; and Yaron Ben-Horin, VP and representative of US Valley Bank in Israel. Adv. Eyal Peled stressed that Israeli companies seeking to operate successfully in the US market should commit to careful planning, corporate discipline, and avoiding hasty decisions. "One of my guiding principles when operating in the US is moving forward cautiously and thoughtfully. Different markets operate under different approaches and business cultures, some of which do not work in the US even more so, not in the defense-tech sector. Accordingly, a company seeking to expand into the US, whether through a US parent company or a US subsidiary, must do so with the proper structure, a US bank account, and an operational infrastructure that enables it to function - and be perceived - as a fully American entity. This applies both to funding sources and hiring. Ultimately, the technology will remain Israeli, but properly structuring US operations helps avoid unnecessary taxable events and enables more efficient operations."
Peled added that policies encouraging local manufacturing are accelerating earlier entry by Israeli companies into the US market. He noted that many companies turn to intermediaries (go-betweens) to market their technology, a move that can sometimes entail significant risks. Granting extensive responsibility to a middleman may result in intellectual property falling outside the company’s control, and in the event of a dispute, the Israeli company may find itself at a disadvantage relative to an experienced intermediary operating from abroad. According to Peled, over the past year, there has been a growing recognition that it is preferable to establish operations and explore independent manufacturing in the US earlier than in the past, without relying on intermediaries. "This approach reduces risk, enables control over the process, and prevents dependence on third parties that could damage a company’s reputation and impair its ability to raise capital in the future."
Adv. Gary Copelovitz stressed the risk of regulatory exposure under Israeli law, even when business operations are conducted outside Israel. He said, "Many Israeli entrepreneurs are unaware of the extraterritorial reach of Israeli defense export regulations, which can apply irrespective of the physical location of the business activity. This matter necessitates thorough legal analysis at the inception of any new venture. Furthermore, as an Israeli entrepreneur establishes a presence in the US or transfers operations from Israel to the US, the degree of regulatory exposure to Israeli law increases proportionally with the extent of the involvement of the management of the Israeli parent company in the US subsidiary. Consequently, operations in the US may subject the US entity to concurrent regulatory regimes, namely those of both the US and Israel, vis-à-vis Israel’s Defense Export Control Authority (DECA) within the Ministry of Defense."
Copelovitz observed that, irrespective of the specific licensing terms, the mere existence of a substantive nexus to Israel may give rise to significant regulatory complexities. "While such connections may be manageable from a financial or strategic perspective," he noted, "the involvement of knowledge transfer, consulting services, or intellectual property, may trigger obligations to engage with DECA, even if the underlying activities are conducted entirely within the US. Therefore, it is imperative to exercise heightened diligence from the earliest stages of planning and to maintain such vigilance throughout the entire lifecycle of the venture."
Adv. Dr. Ziv Preis examined the appropriate timing for founding a US company, the considerations involved in structuring a US entity as either a subsidiary or a parent company of the Israeli entity, and the rationale and challenges associated with executing a so-called "corporate flip," under which a new US company becomes the parent company of the Israeli company. Dr. Preis noted, "Once a resident of Israel is involved, for example, an Israeli executive or officer of a US company, and he or she transfers defense-related know-how from the US company, the question arises as to whether DECA approvals are required, including marketing and export licenses."
Preis addressed the practical implications of transferring knowledge and technology outside Israel. "The Israel Innovation Authority also comes into play," he said. "An Israeli company that has received grants from the Israel Innovation Authority is not permitted to transfer Innovation Authority-funded know-how outside Israel without the Authority’s approval, even when the transfer is to a parent company or to wholly owned subsidiaries abroad. Moreover, obtaining approval from the Innovation Authority alone may not be sufficient; in certain cases, a fee payable to the Authority may also be required. Furthermore, in the context of a corporate flip, the know-how must remain within the Israeli company. Where there is an intention to transfer the know-how from the Israeli company to the US company as part of, or following, a flip, such a transfer constitutes a taxable event. These issues must be considered in advance to avoid ‘surprises’ and unforeseen costs."
Valley Bank VP and representative in Israel Yaron Ben-Horin highlighted a fundamental shift in how the US banking system engages with Israeli companies. "The threshold at which US operations become relevant from a banking perspective has fundamentally changed. Different observers may point to different inflection points, such as war or regime change, but in practice, the past three years have marked a clear turning point. Previously, Israeli companies typically entered the United States only after raising several million dollars and establishing US sales operations through an American subsidiary. Today, an increasing number of companies are incorporated from the outset as US parent companies. The primary driver is the US market itself. A significant share of available capital comes from the US, and many American investors insist on investing in a US entity rather than an Israeli one, for reputational, political, or tax reasons. This dynamic has led to a substantial portion of Israeli high-tech firms being incorporated as US companies."
Ben-Horin added, "From the banks’ perspective, the aforementioned shift represents a significant simplification of the process. In the past, structures where a US company was owned by an Israeli entity, with documentation in Hebrew and subject to foreign regulation, were difficult for American banks to process. Today, we are seeing engagement with US banks at a much earlier stage in a company’s lifecycle, sometimes even before incorporation is completed. There is an idea, there are investors, and there is a need to open a bank account at a very early stage. This trend carries both advantages and challenges, but it reflects the current reality."
Published by Globes, Israel business news - en.globes.co.il - on January 13, 2026.
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