Israel’s maturing cybersecurity startup ecosystem

It often feels like half of the new security startups that receive funding are from Israel. As YL Ventures’ Yoav Leitersdorf and Ofer Schreiber wrote last month, investments in Israeli cybersecurity startups increased to $1.4 billion last year, with average seed rounds of $4.7 million, up 30.5% from 2018.

I spent some time on the ground at CyberTech Global in Tel Aviv a few weeks ago, and the energy in the nation’s security ecosystem was palpable. But this is also an ecosystem that has changed a bit over the last few years as its first wave of startups have been acquired, gone public or shut down. Now, these entrepreneurs are coming back for their second acts, which creates a different dynamic.

There are a lot of reasons why Israel excels in cybersecurity, but one of them is undoubtedly its talent pool, which is fed by intelligence units like 8200 and 81. Indeed, it’s exceedingly unusual to come across security startup founders in the country who did not receive their initial training in the intelligence services. This experience also gives these founders a network of potential co-founders and employees right from the get-go.

It’s worth noting, though, that while more than half of the workforce at Unit 8200 is female, that number does not translate to the same number of cybersecurity founders in the country, though that is slowly changing.

For a long time, Israeli startups had a bit of a reputation for selling early instead of trying to build a massive company. That’s changing a bit now, in large part because the founders themselves may have already sold their first company and aren’t looking for that life-changing sale anymore — and because they now have the experience that gives them the confidence to build larger companies.