Israeli Cyber Security Companies Are on The Rise

Israeli cybersecurity firms have raised an approximate $814.5 million in 81 deals in 2017 in both venture capital funds and private equity deals, according to a new report on Israel’s cyber sector by Start-Up Nation Central. This is a record-breaking amount for the third year in a row and has even exceeded 2016 investments by 28 percent. Israel’s cybersecurity industry comes second only to the United States, and accounts for around 16 percent of the overall cybersecurity investments made worldwide, and has slightly increased its share from 2016 when its share was around 15 percent.

Seventy startups were founded over the course of the year, 20 of them in the IoT sub-sector, according to the report. In addition, 14 Israeli cyber companies made “exits” in 2017, including buy-outs, IPOs, and acquisitions. The valuation of the deals for 12 of them totaled $1.4 billion, according to the report, while the remaining two were closed for undisclosed amounts. Notable exits for 2017 included the acquisition of Argus Cyber Security by Germany’s Continental for over $400 million and the acquisitions of Skycure and Fireglass by Symantec for $280 million and $250 million, respectively.

Three large funding rounds — $150 million for Skybox Security, $100 million for Cybereason, $70 million for SentinelOne — account for 40 percent of the total amount raised for 2017. Last year also saw a growth in the activity of foreign investors, who participated in two of every three funding rounds of Israeli cybersecurity companies in 2017. There were 14 exits that totaled more than $1.4 billion in 2017, exceeding the number and value of exits by Israeli cybersecurity companies in 2016. Several new international players entered the local industry last year, opening R&D and innovation centers, including Symantec, TD Bank, Renault, Daimler AG, and Harman. And the number of non-Israeli investors in the sector increased significantly.

Among the most active investors in 2017 were YL Ventures and JVP Cyber Labs, each with four investments in cybersecurity, and Glilot Capital Partners, Maniv Mobility, Blumberg Capital, and Microsoft Ventures, each with three. Please keep in mind that there are different types of security firms. Cybersecurity deals with protecting the online identity and information of individuals and organizations, an example would be Skybox Security. While traditional security companies provide a physical presence at various locations, an example would be Fast Guard Service.

The increased adoption of the Internet of Things (IoT), with more and more devices connecting to one another, “poses new and significant threats for enterprises, nations, and individuals,” said Nir Falevich, head of the cybersecurity sector at Start-Up Nation Central, who authored the report. “During 2017, Israeli entrepreneurs and investors put many resources in offering solutions to protect IoT networks and devices.” Another threat these companies are resolving is unsecured internet connections, and online phishing strategies used by hackers to steal people’s personal information, financial information, medical information, or usernames and passwords.

As the internet is growing larger and larger each passing year, and as it becomes more encompassing in our lives, Israeli security companies will have their work cut out for them in the years and decades ahead.