Israeli defense tech roadmap to the US market - opinion

Israel’s defense tech industry has been growing exponentially over the last few years. A key target market for Israeli defense tech companies is the United States, with the US defense budget evidencing significant increases, generating tremendous procurement opportunities and driving private sector investment in technologies that support military operations.

In Israel, the defense establishment and the start-up ecosystem enjoy a relatively intimate relationship. Reservists with firsthand battlefield experience often drive new ventures, the Israel Defense Ministry's procurement pipeline is accessible, and regulatory approval cycles, while not trivial, operate on a national scale that allows for close dialogue between innovators and end-users.

In the United States, however, while there are significant efforts to ease the adoption of innovative technologies and eliminate red tape, the continental-scale bureaucracy has a strong institutional bias toward developing and maintaining technologies domestically. Seeking US legal advice on corporate and regulatory compliance early-on is advisable.

And yes, there is also the inevitable cultural gap. American defense procurement values process, documentation, and long-term relationship-building with a clear benefit for establishing US operations and local manufacturing capabilities.

At the same time, Israel's robust innovation ecosystem, in areas such as advanced manufacturing, missile defense, cybersecurity, artificial intelligence (AI), and autonomous systems position it as a strategically significant partner.

The Fiscal Year 2026 National Defense Authorization Act (NDAA) includes a provision directing the Defense Innovation Unit to establish a presence in Israel. The DIU, which serves as the Pentagon's primary conduit for accelerating the adoption of commercial and dual-use technologies, has historically only maintained a domestic footprint. The new mandate reflects a broader congressional intent to deepen the US' defense technology partnership with Israel.

The Export Administration Regulations (EAR), administered by the Commerce Department's Bureau of Industry and Security (BIS), control dual-use items, commercial technologies with potential military applications, and certain military items that have been moved off the USML. Violations of either regime could result in civil or criminal offenses carrying severe penalties, including substantial fines and imprisonment.

Any company that manufactures defense articles in the United States must register with DDTC, even if it never exports a single product. Products purchased or developed in the US that fall under ITAR are subject to strict controls on reexport and retransfer – meaning that sending technology or data back to Israel requires prior authorization. Companies must implement documented compliance programs, train employees regularly, obtain export licenses when required, and conduct thorough due diligence on all parties in any transaction.

Critically, Israeli companies face a dual regulatory burden. Israel's own Defense Export Controls Agency (DECA) exercises extraterritorial reach, and Israeli defense export regulations can apply regardless of where the business activity physically takes place. As operations in the US deepen, the affiliated US entity may become subject to concurrent regulatory regimes from both countries.

Beyond export controls, Israeli companies need to navigate the Committee on Foreign Investment in the United States (CFIUS), which reviews transactions – mergers, acquisitions, and certain investments – that could result in foreign control of or certain rights in a US business affecting national security. Any non-US ownership stake and investment may eventually impact regulatory reviews in the US, and government-backed stakes can prompt stricter scrutiny for companies seeking defense contracts.

Equally important is the Foreign Ownership, Control, or Influence (FOCI) framework. A U. company is regulated under FOCI whenever a foreign interest has the power to direct or decide matters affecting the company's management or operations in a manner that could result in unauthorized access to classified information or adversely affect performance of classified contracts.

A company under FOCI cannot obtain a facility security clearance (FCL) until the FOCI factors have been favorably resolved through mitigation instruments such as board resolutions, security control agreements, special security agreements, or proxy agreements and voting trusts. Notably, the FOCI requirements are now expanding beyond classified contracts under new rules that will apply FOCI assessments to unclassified defense contracts, subcontracts, and research awards valued at or above $5 million.

With the goal of direct defense procurement or via a US prime contractor, there are a number of prerequisite steps to be considered. One such step is registration in the System for Award Management (SAM.gov), the US government's centralized platform for entity registration, contract opportunities, and federal procurement eligibility.

A further critical step is compliance with the Cybersecurity Maturity Model Certification (CMMC) 2.0 program, designed to strengthen the defense industrial base cybersecurity and better protect defense information. Under the phased rollout, Level 1 and Level 2 self-assessment requirements are already being included in new contract awards, and beginning in November 2026, third-party certification assessments by an accredited CMMC Third-Party Assessment Organization will become mandatory for contracts involving Controlled Unclassified Information (CUI). CMMC applies to any organization that handles Federal Contract Information (FCI) or CUI.

US federal research and development funding awards provide reputable validation and an opportunity for relationship-building with program managers. One funding pathway is the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.

The DIU is another funding mechanism soliciting proposals through its Commercial Solutions Opening process, which awards prototype agreements and is, in most cases, open to any individual or commercial entity. Vendors that successfully complete a prototype project are awarded a Success Memo, typically enabling any federal agency to procure the solution without recompeting.

For companies with fully developed, production-ready solutions, there are also various pathways for procurement, one of which is partnering with prime contractors. Israeli defense tech companies have a successful track record as subcontractors and technology suppliers to major US aerospace and defense primes. Success in this channel requires building relationships with the prime contractors, demonstrating interoperability with existing platforms, and ensuring full regulatory compliance.

However, the more lucrative and long-term strategy is direct procurement through the existing US defense acquisition system, which requires both strategic positioning and sustained relationship building. Open solicitations can be found on SAM.gov and companies should establish automated alerts to monitor new solicitations aligned with their capabilities.

Companies should also be proactive in raising their profiles among the Pentagon’s policy makers, namely the offices of the secretary and his deputy, and under secretaries for acquisition and sustainment, and research and engineering, as well as developing relationships and identifying needs with program executive offices and each of the military services’ acquisition and sustainment offices.

These officials control acquisition funding and shape requirements. Engaging them early can help align a company's solution with an identified operational need. Industry days, vendor outreach sessions, and high-profile conferences provide opportunities to meet with contracting officers and program managers, showcase capabilities, and learn about upcoming requirements.

Working with seasoned government relations advisors can provide a significant strategic advantage for Israeli defense tech companies, in both navigating the Pentagon and US Congress. Government relations professionals have established relationships with both Pentagon policy makers as well as members of Congress and congressional defense committee staff, relationships that otherwise can take years for companies to build independently. While helping to raise the company’s profile, they can also help secure substantial funding via the annual Defense Appropriations and NDAA bills. This is often done through congressional "plus-ups.”

Every year, the president submits a budget request to Congress outlining proposed defense spending priorities. Congress is under no obligation to accept the president's request, rather, the House and Senate Appropriations Committees independently review, modify, and ultimately determine how defense dollars are allocated.

A "plus-up" occurs when Congress adds funding above what the president requested for a specific program or appropriates money for an activity for which the Pentagon did not request funding. In the 2026 Defense Appropriations bill, for example, Congress added approximately $18.3 billion for acquisition programs above the budget level, split between $14.4 billion for procurement and $3.9 billion for research, development, test, and evaluation.

Semper Fidelis!

The eagerness for innovative technologies and ideas is shared by many of the senior military officials in the US. Such willingness to embrace change at every echelon, as noted recently by a highly regarded three-star General, is an attitude not seen in decades. Israeli defense tech companies are perfectly positioned to support our closest ally in this quest.