SA国际传媒

With cybersecurity investment spiking to never before seen levels, it is easy to become singularly focused on the large amounts of money U.S.-based companies are seeing.

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While it is true U.S.-based security firms have received unprecedented levels of funding, Israel鈥攖he second-largest cyber startup market in the world鈥攍ikely also will nearly double total venture dollars raised this year.

Cyber companies in that country have raised about $1.6 billion to date this year, according to SA国际传媒 data, smashing last year鈥檚 record of $1 billion thanks to some huge funding rounds.

Some of those large rounds include:

• Just this month, cloud security provider closed a $250 million Series C funding co-led by and at a $6 billion valuation.
• Secure access service edge platform raised a new $200 million round led by at a $2.5 billion valuation, also this month. The company delivers networking and security from the cloud to a company鈥檚 network edge.
• Security assessment provider raised a $120 million financing round, led by back in February.

鈥淚t鈥檚 pretty wild right now,鈥� said , founder and CEO of Israel-based , a platform with about 20 different cyber investments in that country, such as , and .

It is important to note that funding number does not take into account some very large rounds by companies–, which closed a $605 million Series F last month, and , which raised a $550 million extended Series C also last month and others–with Israeli roots but have moved their headquarters to the U.S., a very common practice for Israel-based startups when they are seeking to enter the North American market.

A long history

The reasons for the uptick in funding in Israel has several layers, but it is important to first understand the country鈥檚 history as it relates to cybersecurity.

Israel is not new to cybersecurity. It traditionally has been one of the most fertile countries for cybersecurity startups when one considers its size relative to the U.S. It has produced huge cybersecurity players such as , and possibly most famous in the space .

More recently, , which originated in Israel, debuted on the this summer as the highest-valued cybersecurity IPO ever after raising more than $1.2 billion at a valuation of $8.9 billion.

The interest in the space comes from a heavy emphasis on the sector by the Israeli government. The country鈥檚 military is home to the famed Unit 8200. Originally founded as a pure intel unit by the , through the last couple of decades it has become a premier cyber unit and served as a training ground for many cyber entrepreneurs from the country.

Part of the emphasis is due to the attacks the country often sees: Just last week by cybersecurity firm that looked at ransomware attacks in 140 countries and found Israel as the most affected country.

The focus on cybersecurity through government and military means has rippled down to the private sector. A multitude of large technology brands and multinational companies have opened research and development offices in the country throughout the years to fix the seemingly unfixable problem of security.

鈥淚srael is just the perfect place,鈥� said , founder and managing partner at Israel-based , which focuses on cyber and has investments in companies such as , and .

鈥淵ou have the (military) cyber unit 鈥� and you have so many international companies鈥�, , , , 鈥攖hat all have operations here,鈥� he said.

, general partner at , whose firm has invested in several cyber firms including , and , said the training and entrepreneurial talent in Israel always make it an attractive place to look for investment in cyber or infrastructure software.

鈥淲e think in Israel you have the perfect convergence of academia, defense spending and entrepreneurship,鈥� he said. 鈥淲e are excited about the opportunities that are originating there just as much as other tech corridors including Berlin, Paris, Boston, Bangalore etc.鈥攐utside of the traditional Silicon Valley hub.鈥�

Investing in cyber

That focus on security has brought an outpouring of venture capital money into startups in the country, especially as cyberattacks continue to increase.

While cyber makes up less than 5 percent of venture money received by U.S.-based companies, more than 20 percent of venture investment in Israel have gone to the country鈥檚 cyber, according to SA国际传媒 data.

Samboursky said part of that increase is due to a maturing venture capital and startup ecosystem just over the last decade.

鈥淭en years ago, you had a much smaller VC ecosystem here,鈥� he said. 鈥淐ompanies were happy with a half-billion exit. Now people have bigger appetites.鈥�

Part of that is because many people now starting new cybersecurity companies are often seasoned entrepreneurs, not first time founders like a decade ago, Samboursky said. In addition, venture capitalists in the country are also more experienced, often founders themselves, said Samboursky, a serial entrepreneur.

鈥淭here鈥檚 just more opportunity, more money, more will,鈥� he said.

Times are changing

While often thought of as a smart place to place venture bets on cyber due to lower valuations鈥� as opposed to the high prices in the U.S.鈥攖hose who look at cyber in Israel agree it has become a more competitive area to invest in.

Vaddi said early-stage dollars continue to flow into Israel, and more Israeli VC firms are springing up to look at early opportunities. Samboursky agreed seed investors have increased in the country, but so have larger growth players鈥攕uch as Israel-based 鈥攁s the ecosystem has matured.

However, Medved said he believes more than 80 percent of venture dollars that come into the country are still from U.S. firms; much from large firms that have helped push Israel-based companies’ valuation much closer to their U.S. brethren.

鈥�, , , you know the names,鈥� he said with a laugh.

He does not expect that interest to stop though, especially as cybersecurity becomes not just more important, but more difficult to do.

鈥淚sraelis are very good at the hard parts of cyber,鈥� he said. 鈥淭hey are not afraid of the deep tech things鈥攖he things that are a little bit out there.鈥�

Methodology

Cybersecurity is defined by the industries of network security, cloud security and cybersecurity, as according to SA国际传媒 data. Companies must have their current headquarters in Israel to be considered Israel-based.

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