The second part of Decart’s vision is arguably even more ambitious. Its world-model work points toward a future where games, simulations, e-commerce experiences, advertising, robotics and interactive media can be generated dynamically and in real time, rather than rendered or scripted in the traditional way. As CEO and co-founder Dean Leitersdorf put it:

“World models are the key to moving AI from the virtual world into the physical world.”

This context helps explain why Decart’s latest round attracted so much attention. The company raised $300 million at a reported valuation of $4 billion, in a round led by Radical Ventures, with Nvidia joining as an investor. Other new investors include Atreides Management, Valor Equity Partners, Adobe Ventures, Toyota Ventures and eBay Ventures, alongside returning backers Sequoia Capital, Benchmark and Zeev Ventures. Decart says Amazon is also one of its strategic customers, with a partnership spanning commercial deployment and joint go-to-market efforts through AWS.

Nvidia’s participation adds another layer to the story. Nvidia is the dominant force in AI chips, yet it is backing a company whose software helps developers run AI workloads across multiple hardware environments. That may sound counterintuitive at first, but it also reflects where the market is heading. AI infrastructure is becoming less about a single chip and more about an ecosystem: GPUs, custom accelerators, cloud infrastructure, optimization layers and software that makes all of it usable.

Decart’s round also fits a broader pattern in Israeli tech. According to Startup Nation Central’s Q1 2026 Ecosystem Report summary, Israeli tech raised $4.3 billion in Q1 2026, up 18% year over year, but across only 137 deals, the lowest deal count since 2018. In other words: fewer rounds, bigger bets. SNC also reported that 11 mega-rounds drove 53% of total funding, and that 74% of rounds included a global investor, a record level of international participation.

Decart is a textbook example of that new market: concentrated capital flowing to companies with global ambition, strategic relevance and deep technical differentiation.

The timing also created an unavoidable contrast with AI21 Labs, one of Israel’s original generative AI pioneers. On the same day Decart’s financing was reported, AI21 announced a major restructuring, cutting its workforce from around 180 employees to about 70 as it shifts focus toward AI agent optimisation technology around Maestro.

It is tempting to call this a passing of the baton, not from one company to another, but from one AI era to the next.

AI21 helped put Israel on the global AI map with world-class language models and deep research talent. Its pivot reflects a broader reality: selling standalone models has become a brutally competitive business. The next wave of value is likely to come from making AI faster, cheaper, more reliable and easier to deploy in the real world.

That is exactly where Decart is positioning itself. The AI boom is no longer just about building bigger models. The bottleneck is shifting to compute, inference, latency, cost and reliability. The companies that win will not only be the ones with the smartest algorithms. They will be the ones that can make AI experiences work in production, across hardware environments, at a price customers can actually afford.

The significance for Israel goes beyond Decart itself. It is a reminder that Israeli AI is not limited to “apps on top of GPT.” The strongest Israeli companies often emerge in technically difficult layers: infrastructure, optimization, cybersecurity, data, chips, computer vision and applied AI. Decart sits exactly in that sweet spot. It combines deep systems thinking with a product vision for what real-time AI experiences could become.

The contrast with AI21 is also instructive, but not in a negative way. AI21’s restructuring is a sign of how fast the AI market is maturing. The first phase rewarded model builders. The next phase will reward companies that solve the hard problems around deployment, orchestration, efficiency and real-world usage. Even AI21’s shift to Maestro points in that direction: the opportunity is moving from “who has the best model?” to “who can make AI work better inside complex workflows?”

This is exactly the kind of market where Israeli founders have historically done well. Israel has always been strong when the problem is technical, urgent and messy. Cybersecurity, semiconductors, defense, data infrastructure and enterprise software all benefited from that combination of deep engineering talent, operational pressure and global ambition. AI infrastructure feels like a natural continuation of that pattern.

The encouraging signal is not that every Israeli AI startup will raise a mega-round. Most will not. The signal is that global investors and strategic technology companies are still willing to underwrite very large outcomes when the company sits in a critical layer of the AI stack.

Seen this way, Decart’s round is more than a funding headline. It is a sign that AI infrastructure remains one of the most important markets in technology, that the next wave of AI will be shaped by companies that make models faster, cheaper and more usable, and that Israeli founders continue to punch far above their weight in the most technically demanding parts of the AI stack.

There is still a lot to prove. A $4 billion valuation comes with high expectations, and AI infrastructure is a brutally competitive market. But Decart is attacking a real pain point at exactly the right moment, with the kind of ambition that defines category-creating companies.

If AI is becoming the operating system for the digital economy, companies like Decart are building some of the plumbing that will make it scale.

That is why Decart AI’s $300 million raise is a positive signal for Israeli AI.

This is not just a return to the old open source movement. It is part of a broader shift in how technical products are being discovered, trusted and distributed. For AI, infrastructure, developer tools and agentic software startups, open source is becoming one of the most effective early go-to-market motions. It gives founders distribution, feedback, credibility, recruiting leverage and community before they have the budget to buy any of those things.

The simplest way to put it is that the GitHub repo has become the new pitch deck. In some categories, it may be more important.

Open source as strategy, not ideology

Open source used to be discussed mainly as a development philosophy. It was about collaboration, transparency and the belief that software improves when more people can inspect and contribute to it. That remains true, but it is no longer the whole story.

Famed Benchmark partner Bill Gurley recently published an essay about “open source strategy”, arguing that open source can be used by challengers to commoditise the layer incumbents want to keep closed. His examples include Android, Kubernetes, RISC-V and Overture Maps, all cases where openness was not only a cultural choice but also a competitive weapon. The follower opens the layer that the leader wants to control.

According to Gurley, there’s a real risk we’re facing in the Western world given the absence of strong open-source alternatives to the leading LLMs, which aren’t Chinese companies.

The honest assessment is that there is currently no credible Western open frontier player. Mistral is closest, Gemma is partial, and beyond that the field is empty. The structural conditions that would call one into being , closed-Cathedral incumbents extracting rent, a Chinese-led open ecosystem demonstrating that the playbook works, are present and intensifying. The will to organize around an open alternative is not.

Bill Gurley

That idea feels particularly relevant in AI. The largest model companies have enormous advantages in compute, distribution, talent and capital. For smaller players, open source can be a way to change the rules of the game. DeepSeek showed how powerful that can be. Its release triggered a sharp reassessment of AI infrastructure assumptions and contributed to Nvidia losing close to $593 billion in market value in a single day, according to Reuters.

The lesson is not that every AI startup should open source everything. The lesson is that openness can be a strategic wedge when a market is moving quickly, developers are the first audience and the incumbent advantage depends on keeping a layer proprietary.

GitHub has become a distribution channel

The most obvious reason founders are embracing open source is distribution. In developer-led markets, attention is hard to buy but possible to earn. A useful repository can travel faster than an ad campaign because developers share things that help them build.

GitHub’s own 2025 Octoverse report is a good backdrop for this shift. GitHub says a new developer joins the platform every second, while developers created more than 230 new repositories per minute and pushed nearly one billion commits in 2025. The report also highlights how AI, agents and typed languages are driving one of the biggest shifts in software development in more than a decade.

That matters because GitHub is no longer just where code lives. It is where developers evaluate taste, seriousness and momentum. For an early-stage company, a strong repo can answer questions that a pitch deck cannot: are developers actually using this, are issues substantive, are contributors showing up, are people building integrations, and is there a community forming around the product?

For technical founders, that is incredibly valuable. Instead of trying to convince the market that something is useful, they can let the market inspect and test it directly.

The new open source winners

The most interesting recent examples are not hobby projects. They are venture-scale companies using open source as an adoption model, while monetizing managed services, enterprise features, governance, security, compliance or hosting.

LangChain is one of the clearest examples in AI. It began as a widely adopted open source framework for building LLM applications and agents, and in October 2025 announced a $125 million series B at a $1.25 billion valuation to build a broader platform for agent engineering.

Supabase, the postgres development platform, is another strong example. It positioned itself as an open source alternative to Firebase, benefited from the boom in AI-assisted and “vibe-coded” app development, and reportedly reached a $5 billion valuation in 2025.

Hugging Face, a collaboration platform on models, datasets and applications, has become one of the most important platforms in AI by making models, datasets and tooling easier to share, discover and deploy. The company was valued at $4.5 billion in 2023 and has continued to build around the open AI ecosystem.

OpenClaw is a more recent example in the agentic AI world. Its GitHub page describes it as a personal AI assistant that runs on a user’s own devices, with an MIT license and a positioning around local control. The interesting thing about projects like OpenClaw is not only the product category, but the launch pattern: the repo becomes the artifact, the community becomes the distribution, and developers can understand the product by running it rather than watching a demo.

But of course, open-source is hardly new. The older generation of open source companies proved the commercial model at much larger scale. IBM acquired Red Hat for $34 billion in 2019, still the canonical example of a massive open source software business. IBM later acquired HashiCorp, whose products include Terraform and Vault, in a $6.4 billion deal that closed in 2025. Confluent, built around Apache Kafka, reported $1.12 billion in fiscal 2025 subscription revenue.

The pattern is clear. Open source is rarely the business model by itself. It is the adoption model. The business usually comes from making the open source project easier, safer, more reliable and more enterprise-ready.

Why is open source surging now?

Several factors are making open source more attractive for founders today.

1. Trust – In AI, infrastructure, security and developer tools, customers increasingly want to understand what the software is doing. This is especially true when products touch codebases, credentials, data, workflows, cloud environments or agents with permissions. A public repo does not eliminate risk, but it lowers the trust barrier and gives technical buyers something concrete to evaluate.
2. Speed – In a fast-moving market, founders cannot wait six months to perfect positioning before exposing the product to users. Open source allows them to launch early, learn from real usage and let the community pull the product toward the highest-value use cases.
3. Recruiting – A strong open source project is a talent magnet. Engineers want to work on things respected by other engineers. In some cases, the contributor graph becomes a better recruiting funnel than any outbound process.
4. Ecosystem formation – AI agents, coding tools and data infrastructure are all composable by nature. They need integrations, wrappers, plugins, SDKs and community examples. Open source gives the ecosystem permission to form before the company can build every integration itself.
5. Developer zeitgeist – Builders are used to shipping in public. They are used to sharing repos, prompts, benchmarks, models and demos. In that world, a closed beta can feel slow, while a public repo feels like momentum.

The risks are real

Open source can create momentum, but it also introduces a set of risks founders should not underestimate.

The first risk is monetization. I have a good friend who developed an agentic AI “business in a box” open source platform, similar to Paperclip. He’s not sure about ability to monetise it, given the slew of alternatives. A repo can have thousands of stars and still have no business model. Developers may love a free tool without ever becoming paying customers. In VC terms, stars are not ARR, forks are not retention and Discord activity is not a sales pipeline.

The second risk is giving away the wrong layer. The best open source companies are precise about what they open and what they monetize. They may open source the framework but charge for hosting, open source the protocol but monetize managed infrastructure, or open source the developer tool while charging for team workflows, compliance, security and governance. Founders who open the core value without a clear commercial layer can end up building a popular public good rather than a venture-scale company.

The third risk is cloud capture. If the project becomes important, a large cloud provider can host it, package it and monetize the usage. This has been one of the recurring tensions in open source business models.

The fourth risk is forks. When a company changes its license or governance model, the community can respond by creating an alternative. HashiCorp’s Terraform license change helped trigger OpenTofu, a Linux Foundation-backed fork. Redis’s license change led to Valkey, another Linux Foundation-backed fork. These examples show the delicate balance between building a company and stewarding a community.

The fifth risk is security. Open source does not automatically mean secure. The XZ Utils backdoor in 2024 was a reminder that widely used open source projects can become targets for sophisticated supply-chain attacks. In the agentic AI world, the stakes may be even higher because agents can touch browsers, files, terminals, calendars, credentials and enterprise systems. OpenClaw itself has already faced reported security concerns, including a critical vulnerability that researchers said could allow attackers to take control of a user’s system under certain conditions.

This is why open source founders need to think about governance, permissions, security reviews, plugin ecosystems and enterprise controls from the beginning. Community is a strength, but unmanaged community can also become an attack surface.

What founders should ask themselves

The right question is not “should we be open source?” It is more specific: which layer should be open, and why?

If the goal is to become a standard, openness can help. If the goal is to earn developer trust, openness can help. If the goal is to accelerate integrations and community contribution, openness can help. But if the company has not thought through monetization, governance and defensibility, open source can create as many problems as it solves.

The best open source companies know what they want the world to adopt for free and what customers will pay them to operate at scale. They understand that developers may adopt the project, but enterprises pay for reliability, security, compliance, observability, collaboration, support, governance and peace of mind.

That distinction is crucial. Open source can create adoption, but it does not automatically create a business.

What this means for early-stage investors

As an early-stage VC, I would not fund a company simply because its GitHub repo is growing quickly. But I would absolutely pay attention to the quality of that growth.

The signals that matter are not just stars. I would look at whether the project is being used in production, whether contributors are building useful integrations, whether the issues reflect real pain, whether the project is becoming a default in a specific workflow, and whether there is a clear buyer for the commercial layer.

I would also look for signs of stewardship. In open source, the company is not just building software; it is hosting a community, setting technical direction and deciding how value is shared between users, contributors and shareholders. That is a different kind of company-building skill.

For Israeli founders, this is especially relevant. Israel has deep strengths in infrastructure, cybersecurity, data, developer tools and technical AI products. These are exactly the categories where open source can create a global wedge from day one. A small team in Tel Aviv can reach developers in San Francisco, Berlin, Bangalore and Seoul without waiting for a US sales office, provided the product is useful enough for developers to try and share.

At Remagine Ventures, we are spending more time thinking about these models because AI is changing both what gets built and how it gets adopted. The next great infrastructure or agentic AI company may not start with a closed beta and a long enterprise sales cycle. It may start with a repo, a strong technical point of view and a community that forms before the company fully knows what it will become.

Open source is not automatically good, and it is not automatically venture-backable. It is a strategic choice about distribution, trust and market structure. For founders building in AI, devtools and infrastructure, the opportunity is to decide deliberately which layer should be open, which layer should be commercial and how the two reinforce each other.

Increasingly, the most interesting companies are not hiding the code. They are using it to build the market.

The original version of the Firgun newsletter was published on Linkedin. If you’re new here, welcome! So glad you’ve joined over 7,900 of us!

Firgun (pronounced ‘feer-goon’) is an Israeli term describing genuine, unselfish joy in someone else’s success… It’s basically the opposite of “schadenfreude”. Every week since March 2020, we celebrate the wins of our startup community. Read more about why Firgun matters. If this was forwarded to you and you’d like to subscribe, previous editions are on VC Cafe.

Happy Jerusalem Day! Today is a National holiday in Israel, marking the unification of Jerusalem following the Six Day war in 1967. This week, the Israeli tech ecosystem’s centre of gravity was in New York, where CTech by Calcalist‘s Mind the Tech Week brought founders, investors and corporate leaders together around the next phase of Israel-US innovation. The message was less about survival and more about strategic relevance: Israeli tech continues to operate under uncertainty, but the ecosystem is increasingly defined by AI-native companies, deep tech, cyber, defence-adjacent innovation and founders solving hard global problems.

In the wider tech world, President Donal Trump commenced a high-profile state visit to China, accompanied by a large group of tech leaders including Elon Musk, Jensen Huang etc. The tech ecosystem is closely monitoring potential shifts in semiconductor trade policy. OpenAI launched the OpenAI Deployment Company with more than $4 billion in initial investment and agreed to acquire AI consulting firm Tomoro, signalling a major push into enterprise AI implementation. OpenAI also introduced Daybreak, a security-focused AI initiative designed to help organisations identify and address software vulnerabilities before attackers exploit them. Anthropic and the Gates Foundation announced a $200 million partnership to use Claude in health, education, African-language data, teacher support and neglected-disease research. The company Microsoft is reportedly looking at AI startup acquisitions as it prepares for a more independent future from OpenAI and works toward building a cutting-edge internal model. Google unveiled new Android AI upgrades, including Gemini-powered automation across apps, smarter dictation and new productivity features, reinforcing the race to make AI native to the operating system. xAI released Grok Build, an initial beta version of the company’s agentic CLI, currently limited to SuperGrok Heavy subscribers.. Cerebras reportedly raised $5.6 billion in a blockbuster IPO at a valuation near $40 billion, showing how hot the AI chip and compute market remains. Anduril Industries raised a $5B Series H at a $61B valuation, up from $30.5B in June 2025. Mind Robotics, founded by Rivian CEO RJ Scaringe, raised $400 million to build industrial robots for automotive manufacturing and beyond. TensorWave raised a $100 million Series A co-led by Magnetar Capital and AMD Ventures, another sign that AI infrastructure startups remain highly fundable. Have you seen the newly released pictures of UAP (unidentified aerial phenomena) by the Pentagon? check out war.gov/ufo.

QUOTE OF THE WEEK

“No plan survives first contact with the enemy.”

Helmuth von Moltke the Elder

NEW FUNDING ROUNDS

• Big congrats Tal Shlomo and team Frame Security on coming out of stealth with $50M in funding ($40M series A and previously undisclosed $10M in seed funding) to empower humans against AI cybersecurity threats!
• Way to go Sella Brosh and team NVision Quantum Technologies on raising $38M Series B (plus $17M in debt) to accelerate drug development using quantum technology!
• Well done Max Kane and team Novella on securing $21M in funding (comprised of a $16M series A and previously undisclosed $5M Seed round) to automate complex physical assets insurance with AI brokers!
• Kudos Nethanel Bar and team Coddy on securing a $10M credit line for teaching code in a practice-driven way!

EXITS

• Big congrats Or Eshed and team LayerX Security on the acquisition by Akamai Technologies for a reported $205M to integrate your secure enterprise browser!
• Mabruk Maor Sadra and team INCRMNTAL on the acquisition of your adtech startup by Smartly for an undisclosed sum!
• Well done Amit Shamni and team Bridgify on the acquisition of your travel tech startup by HBX Group for an undisclosed sum!
• Kudos Amit Ben and team OneAI on getting acquired by monday.com for an undisclosed sum!
• Mazal tov Guy Gafni and team Pipio on the acquisition by Riverside for an undisclosed sum!
• Nice one Eli Bejerano and team Bit2C on the acquisition by eToro for a reported $3.45M!

APPOINTMENTS

• Big congrats Asaf Ezra on joining Andreessen Horowitz as a Partner focused on AI Infrastructure!

NEW FUNDS

• Congratulations Yishay Yovel and Shlomo Kramer on the launch of Skinos Ventures, a new $26M venture capital fund focused on early stage Israeli cyber and AI startups! Your new profile on Israel VC is ready for you to claim!

LINKS FOR YOUR BROWSER

REMAGINE VENTURES/ VC CAFE / ISRAEL VC

• Get discovered by the right Israeli founders before they start fundraising – Over 50 funds added to Israel VC this week. Fund managers can now ‘claim’ their profile and get the ‘verified’ badge for increased visibility in search results and Israeli startup founders can easily create the potential investor list for their upcoming rounds.
• Is anything fundable any more apart from Deeptech? In my latest post, I tried to capture the Zeitgeist right now, where VCs are under the impression that software is dead, as the moats have crumbled. Spoiler alert: it’s not.
• Tiny Episodes, Big Business: The Israeli Startups Betting on Micro-Dramas – some of the most popular Entertainment apps offer 90 second vertical video episodes, bringing together content + gamification. I featured 6 Israeli startups operating in this space.

ISRAEL

• America’s best bet for a secure AI base is Israel’s Negev – by The Wall Street Journal The plan is for an AI base that has the security of an American military installation and the creative output of a Silicon Valley hub.
• The Israeli startups to watch out for in 2026 – Qumra Capital selected eleven companies spanning AI, cybersecurity, fintech and health tech are shaping Israel’s next wave of growth-stage innovation.
• At the Globes “Going Long on Israel” conference, Prof. Eugene Kandel called for a holistic approach to the challenge of AI. – Imagine that 5% of Israelis are world leaders in AI, but everyone else is laid off because of it. We need a holistic plan that covers the entire economy.

GLOBAL

• The future of venture capital – unlocking liquidity and growth by World Economic Forum
• Rising in Cyber – the 30 most notable private cybersecurity startups, by Notable Ventures
• 2028: Two scenarios for global AI leadership – Anthropic published a long essay, warning against lifting chip export controls to China

MEDIA OF THE WEEK

IsraelVC got a major upgrade this week. For founders: build and manage a target investor list.For funds: manage discoverability and receive qualified signal.For LPs/corporates: track who is active in Israeli venture.

Always a good reminder: Unicorns per GDP (source: see links section)

The TAM for Cybersecurity is large, growing and diverse (source: see links section)

Open-source AI coding alternatives to Claude Code and Codex (source)

AI models according to their IQ (source)

AI is doing more and more work, according to Andreessen Horowitz (source)

Food for thought by Monty Pyton’s John Cleese on the excuses for Antisemitism in the UK

That’s all for this week. Thank you for reading. There’s a lot to celebrate in our “small” community! Keep on creating!

Eze Vidra

On one hand, AI is producing some of the fastest-growing companies in history. On the other, many software founders are hearing a quieter version of the same question in every investor meeting:

What stops OpenAI, Anthropic, Google, Microsoft, or the next open-source model from doing this?

That question has become the new cold shower. It sits behind the polite feedback. It explains why perfectly good SaaS companies can suddenly feel unfundable. It is also why deeptech, infrastructure, robotics, defence, semiconductors, energy, and anything with a physical or scientific barrier suddenly feels more attractive. Deeptech has become venture’s emotional safe space. I wrote about this in

The logic is understandable. If AI makes code dramatically cheaper to write, then code itself is no longer a moat. If a small team can “vibe code” a credible product in a weekend, then the old SaaS playbook of shipping faster, designing better workflows, and selling seats into a known category is under pressure. Baillie Gifford put it well:

“AI is collapsing the cost and time required to build software,” but the key point is that this is “not destroying software, but redistributing where value sits.”

That redistribution is what investors are trying to price.

The public markets have already reacted. In April, Bloomberg reported that the iShares Expanded Tech-Software Sector ETF had dropped more than 27% in 2026, while a SaaS index was down almost 40%, driven by fears that AI would permanently weaken demand for software. Venture has followed the sentiment. Crunchbase data shows AI captured close to 50% of global venture funding in 2025, and in Q1 2026 AI companies attracted $242 billion, roughly 80% of all global venture funding that quarter.

No wonder founders feel the bar has moved.

But the conclusion that “only deeptech is fundable” is too simplistic.

What is becoming unfundable is not software. It is thin software.

A thin workflow layer. A dashboard over someone else’s data. A prettier interface for a problem that can be solved by a model. A generic “AI copilot for X” with no proprietary wedge, no distribution advantage, no workflow ownership, and no reason to exist once the underlying model improves.

That is a very different statement from saying software is dead.

In its 2026 Software x AI report Sapphire Ventures correctly pointed out:

“AI is now both the primary bull and primary bear case for software.” The same force compressing valuations for exposed incumbents is also expanding the opportunity for companies that rebuild products, pricing, and business models around AI”.

The monday.com example is a useful counterpoint.

monday.com was supposed to be one of the poster children for software commoditisation. Work management, project tracking, internal workflows, dashboards, automations. These are exactly the kinds of categories people assume AI agents will replicate or bypass.

And yet, after reporting Q1 2026 results, monday.com shares reportedly jumped as much as 26% in pre-market trading. The company delivered $351.3 million in revenue, up 24% year over year, raised guidance, reported record operating income, and launched what it calls an AI Work Platform with native agents.

The lesson is not that every SaaS company can rebrand as AI and be fine. The lesson is that investors are still willing to reward software when AI makes the business more strategic rather than less defensible.

monday.com is not just bolting on a chatbot. It is trying to become the orchestration layer where humans, workflows, data, and AI agents meet. It is also moving toward a “seats plus credits” model, which matters because per-seat pricing becomes fragile when one employee can operate multiple agents. The better question becomes: how much work is the platform actually doing?

That is the shift Foundation Capital predicted when it wrote that AI companies would “sell actual work completion rather than just workflow enablement.”

This is where the software moat debate gets more interesting.

In the pre-AI SaaS era, a moat could be product velocity, UX, workflow depth, integrations, sales execution, brand, switching costs, or a growing dataset. In the AI era, those things still matter, but only if they compound into something the model layer cannot easily absorb.

The strongest software companies will have at least one of five advantages.

They own a system of record. They are embedded in a mission-critical workflow. They have proprietary data or context. They control distribution. Or they can price against outcomes, transactions, consumption, or work completed rather than seats alone.

That is why some software companies may become more valuable in the AI era, not less. AI agents need trusted data. They need permissions. They need audit trails. They need integrations. They need a place where work is assigned, executed, checked, and recorded. In other words, they still need software.

Andreessen Horowitz made the optimistic version of this argument recently: “There will still be moats, and as long as there are moats there’s plenty of reason to expect hugely successful and highly durable businesses to survive and thrive.”

That sentence is important because it pushes back on the lazy version of the AI narrative.

AI is not making all software worthless. It is making weak software obvious.

This is especially relevant for early-stage founders. In 2021, a good-looking SaaS product in a growing category could raise because the market believed in cloud adoption, seat expansion, and the repeatability of the SaaS model. In 2026, that is not enough. Investors want to understand why the company becomes stronger as AI improves.

That means founders need sharper answers to these questions:

• Why does your product become more useful when models get better?
• What data or workflow do you accumulate that others cannot access?
• What action do you take on behalf of the customer?
• What outcome are you willing to own?
• What happens if the UI disappears and the user interacts through an agent?
• Do you become the agent, the tool the agent uses, or the system that verifies what the agent did?

These are not cosmetic questions. They are fundability questions.

For Israeli founders, there is an obvious temptation to lean into what Israel already does well: cyber, defence, semiconductors, infrastructure, robotics, industrial AI, and applied deeptech. That is rational. The world is rewarding hard things. Physical constraints, security requirements, regulatory complexity, and technical depth can all create real defensibility.

But it would be a mistake to conclude that application software is over.

Some of the most interesting companies in this cycle will be software companies that look different from SaaS. They may sell outcomes instead of seats. They may combine software and services. They may use agents to collapse the labour cost of a whole business process. They may start narrow, own a workflow deeply, and expand into a system of action.

Bessemer has described AI as “the biggest wave of technology change we’ve ever seen.” The implication is not that founders should stop building software. It is that founders should stop building software as if the SaaS rules of the last decade still apply unchanged.

The bar has moved.

The old question was: can you build it?

The new question is: why will it matter once everyone else can build it too?

Deeptech answers that question with physics, science, capital intensity, regulation, or proprietary IP. Great software companies will answer it with workflow ownership, data, distribution, trust, and AI-native business models.

So no, it is not true that nothing is fundable apart from deeptech.

But it is true that “just software” is no longer enough.

The next great software companies will not be protected by code. They will be protected by context, execution, customer love, data gravity, and the ability to turn AI from a feature into a business model.

That is a much higher bar.

And probably a healthier one.

Quibi tried it with Hollywood budgets and failed. TikTok cracked short-form attention, but mostly through user-generated content. Netflix, Disney and YouTube built massive libraries, but largely around formats designed for the TV screen.

Micro-dramas are something different.

They are short, serialized, scripted stories built for the phone. Usually vertical. Usually one to three minutes per episode. Usually packed with cliffhangers, betrayal, romance, revenge, fantasy, crime, impossible family twists and emotional payoffs. Think soap operas, mobile games and TikTok had a baby.

The format started in China, where “duanju” became a massive entertainment category, and is now spreading quickly to the US, Europe, India, Korea, Japan and the Middle East. Omdia estimated that global micro-drama revenues reached $11 billion in 2025 and could grow to $14 billion by the end of 2026, with the US becoming the largest market outside China.

The short drama phenomenon has been successful not worldwide and some of the apps rank as leaders in the Entertainment category in their respective countries. MyDrama (from the Ukraine) has become the leader in the micro-drama market in the US and Europe. NetShort and FlareFlow, are less than two years old and already shot up to the top 20 most popular entertainment apps in the US.

What makes the format interesting is not only the content. It is the business model.

Micro-dramas borrow from mobile gaming. The first few episodes are free. Then come coins, subscriptions, in-app payments, rewards, unlocks and algorithmic recommendations. Every episode is a retention mechanic. Every cliffhanger is a conversion event. Every viewer action becomes data.

This is why the category is attracting founders from gaming, adtech, AI, streaming and television. It sits at the intersection of several things Israel is unusually good at: mobile growth, performance marketing, data-driven content, AI tooling, gaming mechanics and efficient global distribution.

And while Israel will not outspend Hollywood or China on content volume, it may have a shot at building the technology, formats and mobile-first platforms that define the next wave.

Why micro-dramas matter

Micro-dramas are not just “short videos.” They are a new packaging layer for scripted entertainment.

The episode length changes the writing. The vertical format changes the cinematography. The mobile interface changes the pacing. The paywall changes the storytelling. The algorithm changes the commissioning process.

A traditional TV episode asks: will you come back next week?

A micro-drama asks: will you swipe to the next episode right now?

That changes everything.

The best micro-drama companies do not behave like traditional studios. They behave more like mobile game companies. They test hooks. They analyze drop-off. They iterate genres. They localize fast. They use paid user acquisition. They optimize thumbnails, titles, trailers, episode endings and pricing.

That is what makes the category both exciting and uncomfortable.

It is premium storytelling, but compressed. It is scripted entertainment, but data-driven. It is emotional, but transactional. It is content as product.

The Israeli and Israeli-linked companies to watch

Shortical: the Israeli pure-play micro-drama app

Shortical – http://shortical.com/

Shortical is one of the clearest Israeli entries in the category. The app is operated by Short Entertainment Ltd, listed with a Tel Aviv address on Google Play, and positions itself as a mobile-first destination for short dramas, mini episodes and original vertical series.

Its content mix is very much in line with the global micro-drama playbook: billionaire romance, revenge stories, mystery, fantasy, werewolves, secret heiresses, love triangles and emotional twists. That may sound formulaic, but formula is part of the product. The category works because viewers know what emotional “job” they are hiring the content to do.

Shortical also appears to be thinking beyond content. A recent partnership with Payouts.com introduced creator wallets, positioning the platform as part of a broader creator economy stack for micro-series production and monetization. The company describes itself as delivering serialized, short-form scripted content with episodic hooks and cliffhangers, using a “tech-first” approach and in-app engagement.

The interesting question for Shortical is whether it can become more than another vertical-drama app. The market is already crowded with Chinese, Korean, Ukrainian and US players. To stand out, it will need a differentiated supply engine, sharper localization, proprietary audience data, or a creator network that lets it scale content faster and cheaper than incumbents.

AppReel: premium short drama from an Israeli production house

Appreel – https://www.appreel.tv/

AppReel comes from a different starting point. It was born out of Yoav Gross Productions, the Israeli scripted television company behind shows such as The Good Cop and Red Skies. AppReel says it was created to make high-quality original storytelling accessible to everyone, with content crafted in-house and shaped under full creative control.

That makes AppReel more studio-led than purely tech-led.

Its pitch is not just “watch short videos.” It is “premium storytelling, adapted for a mobile-native audience.” Variety described AppReel as Israel’s first micro-drama platform, launched by Yoav Gross Productions to serve mobile-native audiences.

This matters because one of the biggest risks in micro-drama is quality. The category has grown fast, but it is also full of repetitive tropes, cheap production and aggressive monetization. A company like AppReel can potentially use Israel’s strong TV writing and production talent to create a more premium layer of the market.

The challenge is whether premium production can coexist with micro-drama economics. In this category, speed, cost discipline and feedback loops matter as much as creative polish. AppReel’s opportunity is to prove that a studio can move with the velocity of a mobile product company.

GammaTime: Hollywood, Israeli gaming DNA and performance-led storytelling

GammaTime: https://www.gammatime.ai/

GammaTime is not a purely Israeli company, but it is highly relevant to the Israeli map. Globes described it as an Israeli-US startup founded by Israeli gaming entrepreneur Slava Mudrykh, former Miramax CEO Bill Block and Alex Montalvo.

The company raised $14 million in seed funding led by Israeli funds vgames and Pitango, with participation from Alexis Ohanian, Kris Jenner, Kim Kardashian and Traverse Ventures.

GammaTime’s positioning is premium micro-drama for American audiences. It launched with more than 20 vertical originals across suspense, romance, melodrama and true crime, including content from Anthony E. Zuiker, creator of CSI.

“We are a demand driven, technologically determined content app where the next billion consumers will discover premium stories to satisfy their appetite. Combine that interest with our creative talent and Slava Mudrykh’s mobile team of experts and we are well positioned to win in this category.”

Bill Block, Gammatime CEO and former Miramax CEO

What makes GammaTime interesting is the blend: Hollywood content relationships, Israeli mobile/gaming growth DNA, and a data-driven production process. The company says it uses predictive AI and audience testing to decide what enters production and reduce creative waste.

This is the category’s core thesis in one company: the future of scripted entertainment may look less like a greenlight committee and more like a live-ops content machine.

RoseBerry Media: turning TV libraries vertical

RoseBerry Media – https://roseberry.media/

RoseBerry Media is another new Israeli-linked entrant, and it may be one of the more strategic plays.

Launched in May 2026, RoseBerry is a vertical TV studio with bases in New York, London and Tel Aviv. It was founded by Guy Hameiri, Lior Friedman, Itay Koppel and Simi Efrati, and is focused on producing and adapting TV library content into mobile-first vertical formats. (C21media)

The company has already secured partnerships with major distributors including A+E Global Media, All3Media International, Banijay Rights, Cineflix Rights and Fremantle to repurpose existing library titles into micro-content for mobile. (StreamTV Insider)

This is a smart wedge.

Instead of only producing new originals from scratch, RoseBerry is trying to unlock value from existing IP. That could be a major opportunity for rights owners sitting on libraries that younger mobile audiences may never discover in their original format.

The key question is creative translation. A show made for a 42-minute TV episode does not automatically work as 90-second vertical clips. The work is not just cropping. It is pacing, reframing, restructuring and sometimes rewriting. If RoseBerry can create a repeatable workflow for “verticalizing” premium IP without damaging the story, it could become infrastructure for studios trying to enter the category without building it all in-house.

The picks-and-shovels layer

Spikes Studio: https://www.spikes.studio/short-drama

Not every winner in micro-drama will be a consumer app.

Spikes Studio is an Israeli AI video company that started with tools to turn long videos into short social clips. Its site now positions it as introducing the “World’s First Micro-Drama Engine & Library,” and its AI editor identifies strong moments in video and turns them into social-ready clips.

More recently, Spikes partnered with GammaTime to build a premium library of vertical short dramas using an AI conversion engine. The partnership focuses on adapting existing catalogs for mobile viewing, optimising pacing, framing and cliffhangers while preserving the original narrative arc.

Lightricks: https://www.lightricks.com/

Best known for Facetune, Videoleap and its broader creator-tool suite, also belongs in the picks-and-shovels layer of this market.

The company has been investing heavily in AI video creation through LTX Studio and its open-source video model work, positioning itself as part of the “open creativity stack” for creators, studios and enterprises. The company allows the creation of 4K quality videos and 20 seconds in length at a tenth of the price offered by Google’s competing technology (Veo3), which allows the creation of up to 10 seconds. They are increasingly relevant for anyone trying to produce, adapt, localise and test video content at speed.

The economics of the category depend on producing large volumes of vertical, mobile-first video quickly and cheaply, while still keeping enough quality to make viewers care. AI tools can help generate storyboards, create shots, adapt scenes, edit faster, test visual hooks and repurpose content across markets.

That is a compelling “picks and shovels” approach.

In many ways, this may be Israel’s strongest wedge into the category: not owning every show or app, but powering the workflow behind the next wave of mobile-first entertainment.

Why Israel has a shot

Israel has three unfair advantages in this market.

First, mobile gaming DNA. Micro-dramas are monetised like games. Israel has deep experience in user acquisition, retention, personalisation, ad monetisation and in-app purchases.

Second, production talent. Israel has a strong track record in scripted formats, from Fauda to Shtisel to Hostages and many others adapted or distributed globally.

Third, AI and automation. The economics of the category depend on producing, testing, localising and adapting content at scale. That is a technology problem as much as a media problem.

The most interesting Israeli companies will not simply copy ReelShort or DramaBox. They will bring something native to the Israeli ecosystem: performance marketing, creative compression, AI-assisted production, interactive mechanics, or a B2B layer for global studios.

The content might be tiny, but the challenges are not

The opportunity is real, but so are the risks. Speaking casually to another VC about short form dramas, the first concerned that comes up is similar: how many people will eventually be willing to pay for this short form content. If the pie doesn’t grow significantly, and as technology makes it easier to enter the market, will there be room for them all? 

1. The market is already crowded.
Chinese players moved early and aggressively. Platforms like ReelShort, DramaBox, ShortMax and others have built large libraries, strong UA machines and deep knowledge of what converts.

2. User acquisition can become brutal.
Like in gaming, Micro-drama apps often depend on paid acquisition. If customer acquisition costs rise faster than viewer monetisation, the economics can break quickly. UA took a massive hit on gaming and its logical that the impact will be the same for micro dramas, especially as competition increases.

3. The content can become repetitive.
Billionaire romance, werewolves, revenge, mistaken identity and secret heirs work, until they all start to feel the same. The winners will need format innovation without losing the emotional simplicity that makes the category addictive.

4. Monetization may face backlash.
Coins, subscriptions and pay-per-episode mechanics can generate strong revenue, but they can also frustrate users if pricing feels opaque or extractive. The Verge has noted criticism around aggressive freemium models, high weekly fees and confusing reward systems in the category.

5. AI creates both leverage and risk.
AI can reduce production cost, support localization and help adapt content. But it also raises questions around quality, rights, likeness, creative ownership and the flood of low-quality “AI slop.”

6. Premium and performance may be hard to reconcile.
Traditional TV wants craft. Mobile content wants speed. Micro-drama demands both, but the market may reward the companies that optimise ruthlessly rather than the ones that produce beautifully. In addition, a lot of the content is borderline soft-porn, which might make it difficult to find an acquirer for, if the companies were to sell.

The bigger picture

Micro-dramas may look silly from the outside. Many of them are melodramatic, formulaic and designed for instant gratification.

But dismissing them would be a mistake…

Every major shift in media starts by looking inferior to what came before. YouTube looked amateur. TikTok looked trivial. Mobile games looked less serious than console games. Creator content looked less professional than television.

Then the audience moved.

Micro-dramas are not replacing Netflix or HBO. But they are creating a new category of mobile-first, emotionally charged, serialized entertainment. A category where writing, gaming, AI and performance marketing collide.

For Israeli founders, that collision is interesting. The opportunity is not just to build another short-drama app. It is to rethink how scripted entertainment is created, tested, distributed, monetized and personalised for the phone.

That could mean new consumer platforms.

It could mean AI tools for studios.

It could mean interactive characters.

It could mean verticalizing existing IP.

It could mean creator marketplaces for serialized fiction.

It could mean a new kind of “content live-ops” company, where every story is continuously optimized after launch.

The format may be small.

The market is not.

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Firgun (pronounced ‘feer-goon’) is an Israeli term describing genuine, unselfish joy in someone else’s success… It’s basically the opposite of “schadenfreude”. Every week since March 2020, we celebrate the wins of our startup community. Read more about why Firgun matters. If this was forwarded to you and you’d like to subscribe, previous editions are on VC Cafe.

This week the Israel Innovation Authority published the draft of Israel’s national AI strategy (see links section below) to answer an important question: what does it take to remain strategically relevant in the AI era? Israel is already deeply immersed in AI and globally strong across key metrics (for example, it’s the number one user of Anthropic per capita), but staying ahead will require more deliberate government investment, stronger coordination with the National AI Directorate, and real input from founders, investors, researchers and the public sector. The opportunity is not to compete with the US and China on giant foundation models. It is to win where excellence matters more than scale: AI-native applications, AI infrastructure, physical AI, defence-adjacent technologies and strategic alliances.

In the wider tech world, Anthropic‘s Q1 revenue grew 80x year-over-year, with ARR now reportedly above $44 billion. The company is raising tens of billions of dollars at a valuation approaching $1 trillion. It signed a major compute deal with SpaceX, to lease all computing capacity at SpaceX’s Colossus 1 data center (more than 300 megawatts of AI compute powered by over 220,000 Nvidia GPUs. Also, Anthropic has reportedly committed to spending as much as $200 billion on Google’s cloud infrastructure and chips. Anthropic also announced higher Claude usage limits and ten ready-to-run financial services agent templates for pitchbooks, KYC and month-end close. OpenAI rolled out GPT-5.5 Instant, available to everyone. A new study showed that OpenAI’s o1 model beat hundreds of physicians on differential diagnosis, management planning, and real-time ER triage. The company finalised a $10 billion joint venture with PE firms for enterprise AI deployment venture backed by investors including TPG, Brookfield, Advent and Bain Capital, while Anthropic partnered with Blackstone, Hellman & Friedman and Goldman Sachs on a rival AI-native services company, showing that the next AI battleground is enterprise implementation, not just model quality. OpenAI also lost two senior leaders this week: Paul Zimmerman, NACD.DC, who left to join Google as head of private equity; and head of sales James Dyett, who moved to Thrive Capital. DeepSeek AI raised $2 billion from the Chinese government at a reported $50B Valuation. Another Chinese AI startup, Kimi (Moonshot AI), a three-year-old Beijing startup that develops open-weight large language models (Kimi), raised a $2 billion round at a $20 billion valuation. Kalshi, which operates a regulated prediction market, raised a $1 billion Series F round at a $22 billion post-money valuation, doubling its valuation in just five months. Sierra, the customer-experience AI startup founded by Bret Taylor and Clay Bavor, raised $950 million round at a valuation above $15 billion, and said it now serves over 40% of the Fortune 50. Google DeepMind, Microsoft and xAI signed agreements with the US Commerce’s Center for AI Standards and Innovation to allow pre-deployment national security testing of frontier AI models, making AI governance and model security part of the weekly news cycle. Microsoft published its 2026 Work Trend Index, arguing that the constraint is no longer what people can do with AI, but how organisations redesign work around people and agents. Google rolled out new AI-powered bidding and budgeting tools for Search and Shopping ahead of Google Marketing Live, as well as Fitbit AIR, a wearable competitive with WHOOP. NVIDIA deepened its AI infrastructure push with a reported plan to invest up to $2.1 billion in IREN as part of a 5GW AI data centre deal. Coinbase is laying off about 700 employees or 14% of its workforce as part of a restructuring that includes flattening management layers and increasing reliance on AI tools.

QUOTE OF THE WEEK

“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”

Sun Tzu

NEW FUNDING ROUNDS

• Big congrats Alon Dror, Hamutal Meridor and team Kela Technologies on securing a $200M series C at a $1.2 billion valuation to develop an operating system for modern militaries!
• Way to go Omer Kaplan and team ZyG on raising a $60M series A to build the first agentic Operating System for eCommerce DTC brands at scale!
• Kudos Atai Barkai and team CopilotKit on raising a $20.5M series A and previously undisclosed $6.5M seed to help developers build and deploy AI agents within applications!
• Well done Roei Zerahia and team MSICS Pharma on securing a $3.6M seed round to develop medical-grade psilocybin therapies for mental health conditions such as PTSD, depression, and OCD!

EXITS

• Big congrats Alon Jackson and team Astrix Security on the reported $350m-$400M acquisition by Cisco to protect enterprises from AI Agents and manage non human identities.
• Well done Idan Rotbart and team Buyverse (acquired by Keyz) on the acquisition by Keyz for an undisclosed sum!

NEW FUNDS

• Mazel tov Yaron Elad and Elik Etzion on the launch of AlphaDrive Ventures a new $100M fund focused on Israeli startups in cybersecurity and artificial intelligence!
• Congratulations Yaron Kniajer, Jared Kash and team Surround Ventures on the first closing of a $50M early stage fund focused on Israeli deep tech startups!

LINKS FOR YOUR BROWSER

REMAGINE VENTURES / VC CAFE/ ISRAEL VC

• AI-Native Services: The New Startup Playbook – the next SaaS company won’t look like a software company. Small teams are now replacing accountancy offices, law firms, agencies, etc. Y Combinator Andreessen Horowitz all agree this is the next big trend.
• The Chokepoint Thesis: Moats, Affordance and Diffusion – taking inspiration from a book by Eddie Fishman, I looked at what are the chokepoints for startups, defensively and offensively and introduced Sequoia Capital Global Equities MAD framework.
• Israel’s 2026 National AI Strategy – my take on the official draft by Israel’s Innovation Authority. I agree with the premise: Israel needs to play on its strengths and not try to outspend the US or outscale China.

ISRAEL

• Strengthening the Global Leadership of Israeli High -Tech in the Age of AI: Where Excellence Outweighs Scale – Vision, Targets, and Operational Steps – by Israel Innovation Authority
• Shifting Sands: Israel’s Role as a Financial Capital in an Evolving Middle East – report by Jefferies
• Israeli startups raised over $1.25 billion in April, the strongest April since 2021, driven by Vast Data’s $1 billion round.

GLOBAL

• The 2026 AI Adoption Index by ICONIQ – Rather than prescribing a single definition of success, the goal is to create visibility into how AI is actually being adopted across the business, putting a stake in the ground on measurement, and separating signal from noise.
• The AI 100 – the most promising AI startup list by CB Insights A number of companies on this year’s AI 100 are deploying agents at scale that independently execute multi-step workflows without human sign-off on each step.
• One of Iran’s most powerful families founded its largest crypto exchange. It’s used by the IRGC to move millions – how crypto plays a role in geopolitics, money laundering and terror funding

MEDIA OF THE WEEK

Israel VC has been live for a week! We’ve made a huge amount of progress. Fund owners can now claim their fund profile page (and get a ‘verified’ badge for increased visibility) and founders can build their initial investor list for a round. Check out the updates at www.israelvc.com

The Israeli Industrial AI startup landscape created by Fay Goldstein was added to my 2026 Israeli startup landscape maps collection on VC Cafe (source)

The 5 years KPIs and pillars of the 2026 Israel National AI plan by the Israel Innovation Authority (source)

I’m very proud that Remagine Ventures was one of the ‘frequent investors’ in Israel, who completed at least 3 investments over the past 8-quarter period. Report by IVC Data and Insights

The AI 100 – the most promising AI startups according to CB Insights (source)

LLM enhanced messaging landscape by Menlo Ventures (source)

The open-source agent stack by Basis Set (source)

Thats’s all for this week. Thank you for tuning in! There’s a lot to celebrate in our “small” community. Keep on creating!

Eze Vidra