“There is a rising focus on infrastructure and hardware heavy sectors, as AI makes differentiation and moats more difficult within software,” explained Two Lanterns managing partners, John Harthorne and Michal Gilon-Yanai. “We believe Israel is well-positioned to succeed in both of these areas, with a strong ecosystem of innovators across both software… and hardware.”

Two Lanterns joined CTech as part of its IL Tech in NY series in collaboration with Israeli Mapped in NY, a project spotlighting New York-based VCs and their perspectives on the Israeli tech ecosystem. The firm, which was established in 2020, is focused solely on seed-stage AI software startups in the US and Israel.

For Israeli founders aiming to appeal to New York-based VCs, Two Lanterns believes “the most successful founders in 2026 will be those who retain their agility while layering in the governance and systems required to build enduring, backable companies.”

You can read the entire interview below.

Fund IDName and type of VC: Two Lanterns Venture Capital – Seed-stage AI software startups in the US and Israel.
Main sectors of investment: Artificial Intelligence; Software
Names of managing partners: John Harthorne; Michal Gilon-Yanai
Year of founding/start of NY operations: 2020
Total assets under management: $40M
Notable portfolio companies: Botika, Jot-it, Linguana, Loora, Shipin, & Voyantis

General background on the VC, its managers, founders and partners:

The primary focus of Two Lanterns is on Software AI startups at pre-seed and seed in the US and Israel. Our Fund II is a $30 million plus fund with a target of approximately 25 investments, seven of which are completed, as well as at least 50% Israeli founders, though we are currently at 85%. Co-investors include Bessemer, a16z, Spark Capital, F-Prime, Zeev Ventures, Founder Collective

Partners John Harthorne and Michal Gilon-Yanai have worked together for 20 years and have invested in over 40 startups together.

Prior to Two Lanterns, Harthorne was the Founder and CEO of MassChallenge, the world’s largest startup accelerator where he oversaw the creation of 10 startup accelerators globally which graduated over 3,000 startups that generated billions of dollars of revenue. John earned his MBA at MIT, where he won the MIT $100K Business Plan Competition and Patrick J. McGovern Award for Entrepreneurship. He remains actively engaged at MIT and MassChallenge and advises numerous accelerators and venture funds giving him ongoing access to very high-quality deal flow globally.

Gilon-Yanai has founded and/or led multiple entrepreneurship programs at Reichman University, MIT, and NYU. Michal began her career at a healthcare IT startup where she filled several roles and served as a member of the company’s management team. Michal is Israeli and her family has excelled at startup investing for decades, which provides her and Two Lanterns with continuous access to extraordinary deal flow from Israel. Michal’s father, Zohar Gilon, is one of Israel’s most prominent Super Angels, and her brother Amit is a successful seed-stage investor. Michal served in the IDF Intelligence corps, received computer science and law degrees from Tel Aviv University, and earned her MBA from MIT.

The VC Vision:

We have spent our careers developing the knowledge, skills and access required to generate maximum impact and financial returns by identifying, funding, and supporting the highest-potential founders and startups in the US and Israel.

Following the turbulence of recent years and the stabilization of 2025, the Israeli ecosystem is entering a new era: The Evolutionary Leap. For the “Israel Tech in NY 2026 project” CTech is challenging top investors to identify the critical leaps ahead – financial, technological, and mental – as we create a roadmap for a matured innovation hub, ready to redefine its impact on the global stage.

After a period defined by cash preservation, will 2026 see the reopening of the IPO window for Israeli tech, or will M&A remain the sole viable liquidity event?

Historically, most exits in Israel, and globally, have occurred via M&A as opposed to IPOs. In 2025, this disparity was even more pronounced.

The vast majority of Israeli liquidity events in the past year were mergers or acquisitions, and for larger companies in particular, M&A activity outpaced IPOs, with 2025 marking an all-time record high for unicorn exits via acquisition globally. That said, after several years of muted IPO activity, the market is showing early signs of revitalization, with seven Israeli IPOs in 2025 and additional listings expected in 2026. We expect M&A to remain the primary path to liquidity, but the IPO window appears to be gradually reopening for select companies.

Moving past the market correction, what is the single most critical metric (e.g. EBITDA, NRR, Rule of 40) that will drive premium valuations in 2026?

There isn’t a single metric that on its own defines what will drive premium valuations in 2026. Valuation multiples primarily depend on a startup’s industry and stage, as well as the level of demand for investing in a particular deal.

The market does appear to be prioritizing revenue and good unit economics, at least outside the hottest parts of the AI bubble, however, at the early stage (pre-seed and seed), financial metrics such as EBITDA, ARR, and growth rates are often limited or nonexistent. At these stages, valuations are driven by the strength of the team, perceived size of the market opportunity, early signs of product-market fit and perceivable moats. Throughout market highs and lows, we have continued to prioritize the team, market, and strategic differentiation as opposed to relying on a sole financial metric.

How is the ‘Israeli Tech’ asset class being effectively rebranded to global LPs in 2026? Are we shifting the narrative from ‘Innovation’ to ‘Extreme Resilience’?

Innovation has been a core part of the reputation of the Israeli tech ecosystem for decades, but over the past few years, global LPs have also seen a clear demonstration of extreme resilience, both at the founder and the ecosystem level.

This ability to build, scale, and deliver through times of war and high volatility has secured confidence in Israeli tech as a stable investment and asset class. This is less of a shift from Innovation to Resilience, and more of an increased trust in the ability of Israeli founders to persevere through obstacles and difficult conditions.

The war also drove a new wave of inventive technologies, particularly in dual use tech, AI, and cybersecurity, reinforcing the perception of Israel as a hub for innovation.

As we transition from ‘Copilots’ to autonomous ‘Agents,’ which specific vertical will be the first to fully trust AI with independent decision-making and execution?

The first verticals to fully trust autonomous AI agents will likely be areas where the downside of mistakes is limited and guardrails can be clearly defined. Highly regulated and mission-critical industries, like healthcare and financial services, will move more slowly and cautiously.

We expect earlier adoption in simple business operations, ecommerce, and customer facing workflows, particularly in repetitive, rules-based functions like lead generation, outbound sales sequencing, and customer service, where parameters can be tightly set (e.g. issuing discounts to customers within a defined monetary range). Trust will build first in these environments where agents can operate within constrained systems, before expanding into high stakes domains.

This will lead to intense competition, which we are already witnessing in the first category, while stickiness and significant moats will likely be more attainable in the higher stakes environments where workflows are complex, and where access and ownership of unique, private data will continuously improve performance.

With the rising focus on hardware-heavy sectors (Defense, Climate, Quantum), is the Israeli VC model adapted to fund high-CAPEX ventures, or will the ecosystem remain focused on capital-efficient software solutions?

Two Lanterns VC is primarily focused on software-only startups; as a small fund, we aren’t well-positioned to fund high CAPEX, hardware-heavy ventures. This is predominantly due to the high levels of capital expenditure required, which leads to high potential dilution. However, when capex is likely to remain relatively low, generally when software is the primary proprietary innovation and hardware is primarily off-the-shelf, we are willing to consider investment.

More generally, there is a rising focus on infrastructure and hardware heavy sectors, as AI makes differentiation and moats more difficult within software. We believe Israel is well-positioned to succeed in both of these areas, with a strong ecosystem of innovators across both software (Cybersecurity, vertical AI/ML, etc.) and hardware (Defense, Energy, AgriTech, etc.).

As Israeli founders in New York shift from ‘Survival Mode’ to ‘Sustainable Scale,’ is the famed Israeli agility and improvisational DNA still a competitive advantage, or does 2026 demand a radical shift towards disciplined, American-style corporate governance to win a check from a NYC based VC?

Agility and the ability to improvise, along with discipline and strong governance, both remain important for Israeli founders in New York to varying degrees, depending on the stage and industry of the company.

Investors value and appreciate the Israeli advantage when it comes to moving quickly, with lean resources, and this continues to be a competitive advantage. However, the market and stage of the company dictate how much disciplined, American-style corporate governance matters. For example, in early-stage, consumer startups agility and improvisation are the priority. As companies scale, and from the start for those in highly regulated industries, a more disciplined approach with high levels of corporate governance is required.

Ultimately, it’s not a choice between improvisation and structure; the most successful founders in 2026 will be those who retain their agility while layering in the governance and systems required to build enduring, backable companies.