Three Mistakes Israeli Defense-Tech Founders Make in the U.S., and How to Fix Them

From our unique vantage point in the United States, we have a front-row seat to the rapid acceleration of the U.S. Defense Industrial Base.

Every week, we meet Israeli defense-tech founders whose technologies are more advanced, more battle-tested, and more operationally proven than many of their American counterparts.

Yet many of these companies are absolutely doomed to fail.

And the problem has nothing to do with the technology. 

It has to do with the famous maxim that legendary UCLA basketball coach John Wooden used to say: “Failing to prepare is preparing to fail.”

Here are the three most common mistakes, and how to avoid them:

1. Delaying U.S. Infrastructure Until It’s Too Late

Many Israeli founders view U.S. market infrastructure as something that can be addressed after they find a customer.

The reality is the opposite.

What Israeli founders don’t understand is that U.S. defense procurement is increasingly shaped by President Trump’s America First Investment Policy, which prioritizes domestic manufacturing, domestic jobs, domestic ownership structures, and domestic supply chains. Whether fair or unfair, many procurement officials and prime contractors prefer to engage companies that already look and operate like U.S. businesses.

That means Israelis need to establish the necessary U.S. infrastructure early.

Unfortunately, most Israeli defense-tech founders — many of whom previously operated in other sectors — seem to act like they’re still in the digital health market or consumer products industry, assuming these are administrative details that can be handled later. On the contrary: We have watched this issue become a gating factor that delays partnerships, teaming, pilot programs, subcontracting opportunities, and contract awards.

This is not rocket science. Creating a U.S. entity, getting a CAGE code, and addressing basic compliance matters is now table stakes.

Think of it this way: There are nearly 5,000 U.S. defense-tech and national security startups competing with your Israeli startup for contracts, solicitations and teaming opportunities. They’re on-the-ground, spending time with warfighters, and — trust us — they already have their CAGE code and are ready to go. If you don’t, you’re operating at a disadvantage.

But there’s a simple solution. Working with our U.S. legal partners, The CET Sandbox is creating a simple, inexpensive program to accelerate the speed with which you can create a U.S. entity, get your necessary documentation — from a Unique Entity Identifier (UEI) for federal award management, to a Commercial and Government Entity Code (CAGE code) — and to address compliance basics, including a cybersecurity self-assessment to meet the U.S. Department of War’s security requirements for protecting sensitive government information.

Contact us to learn more about this service, or talk to a U.S. law firm (emphasis on U.S.).

In our experience, the companies that succeed in the U.S. don’t wait until they have an opportunity. They build the infrastructure before the opportunity appears.

2. Clinging to “The Network Fallacy”

Many Israeli founders come from elite military units such as Shmoneh Matayim and Sayeret Matkal.

These units are actually powerful networks. Trust matters. Relationships matter. Shared experience matters. 

Well, the U.S. defense ecosystem operates exactly the same way.

The Pentagon, military services, program offices, defense primes, Congressional staff, former flag officers, acquisition professionals, and national security investors have their own relationship-driven ecosystem. They served together, they’ve worked together for decades, and — just like 8200 — they are an exclusive club you will never be part of. 

Ever.

Yet many founders believe they can break into that ecosystem without having the secret handshake, the old school tie, or the decades of relationships that everyone else spent a career building.

You are not part of that world. 

We’ve watched this movie dozens and dozens of times, and we know how it ends.

The founders who move fastest are willing to engage experienced advisors, consultants, business-development professionals, former acquisition officials, and others who understand how the system actually works and personally know the decision makers..

That costs money. 

But most Israeli founders want to rely on an outdated network fallacy (which I like to call the “shtetl fantasy”) that their cousin’s friend in New York is going to open doors for them or for a “finder’s fee.”

That might work in other markets, but not the $1 trillion U.S. defense market.

Case in point:

The CET Sandbox recently hosted an event with the former CTO at the Pentagon. Afterwards, several Israeli startups asked us to make personal introductions. Yet those startups balked when we clarified that this CTO would only work on retainer. “We only do success fees,” said one of the startups. “We want him to have skin in the game.”

Skin in the game?! You’re not even IN the game! You’re not even in the stadium! You’re on the outside looking in, and nobody of merit is going to help you for free. Stick with your cousin’s friend, and good luck.

The CTO put it this way: “They want access to my 30 years of experience and my personal network, which I’ve spent decades cultivating, for free? You’ve got to be kidding me.”

Israeli founders need to get past this old mentality of trying to succeed in the defense market without the human capital investment. . 

Don’t look at these experts as a cost: View them as a force multiplier.

But just know that if you don’t hire them, they’re going to get hired by a U.S. defense-tech startup that’s trying to kick your ass, and they’ll do it even if your tech is better, because they’re on the inside, and you’re not.

3. Believing Technology Superiority Wins Contracts

This may be the most common mistake of all.

Israeli defense-tech founders often arrive with extraordinary capabilities. Their systems may outperform competing solutions on nearly every technical metric.

Unfortunately, U.S. defense buyers are not purchasing technology.

They are purchasing solutions to operational problems. We’ve covered this in our programs with Steve Blank at Stanford, with VCs like Sean Singleton, and others. 

A program manager rarely asks, “Which technology is best?”

Instead, they want to know, “Does this solve my mission problem?” “Can it integrate with my existing systems?” “Can I procure it through an existing program?” “Who will support it after deployment?” “Can it even survive the acquisition process?”

Technically superior solutions regularly lose out to solutions that better fit the program.

This can be frustrating for founders coming from a culture that rightly touts its battle-tested, late-stage TRL capabilities. 

But in defense procurement, technology is only one variable among many.

Integration, sustainment, acquisition pathways, stakeholder alignment, political considerations, and programmatic fit often matter just as much.

Sometimes more. 

The Bottom Line

Israeli defense-tech companies possess some of the world’s most innovative and battle-proven capabilities.

Their challenge in the United States is rarely technical.

But success requires building U.S. infrastructure before it becomes necessary, leveraging experts who understand the defense ecosystem, and recognizing that procurement decisions are driven by mission outcomes, not technical specifications.

The founders who understand these realities early dramatically improve their odds of success.

The ones who don’t often spend years learning lessons that could have been avoided from the start.

Let us know how we can help.