Last month, the award-winning Israeli-based startup, Armis, was bought for $1.1 billion. The sale, which is unusual as the buyer is a private equity fund and not a multinational tech giant, holds the record as the largest sale in the history of Israel’s cybersecurity space. It is rumored that this exit will create an estimated 30 to 40 new millionaires and will benefit each and every Armis employee.
Since being established a mere four years ago, Armis laid the foundation to become a future powerhouse by investing heavily in the development of enterprise security products that focus on the safety and security of Internet-of-Things (IoT) devices. All IoT devices face the challenge of being vulnerable to attacks by viruses or hackers as typical antivirus security defenses cannot be installed on them.
Armis approached and addressed these vulnerabilities by developing a cloud-based agentless security platform that picks up or recognizes all the connected devices in an organization’s environment. Once identified, a behavioral profile is created for each device which then becomes blocked the moment it breaks out of the created profile or creates an anomaly. To date, Armis has 10 million profiles in its catalog which covers over 250 million active devices worldwide. But their success should come as no surprise.
The Israeli Way
When it comes to the number of millionaires worldwide, Israel is currently ranked 23rd, but this number is about to skyrocket. According to the annual Global Wealth Report, Israel will have over 173,000 millionaires by 2024, an almost unheard-off 32% growth rate.
The Shekel may be the world’s strongest currency (link to image)
The global cybersecurity market currently stands at over $140 billion and is projected to reach $290 billion by 2026 – not counting the spend on internal processes and staff – and Israel has a main seat at the table. Apart from Israel’s well-known dynamic culture, which focuses on the initiative, innovation, and improvisation, its people’s focus is channeled into a variety of distinct academic pursuits.
Cybersecurity awareness and education in schools begin around the age of 12 and Israel offers cybersecurity as an elective during matriculation exams – the only country in the world to do so. Several of Israel’s universities offer undergraduate specialization in cybersecurity and six are dedicated to cybersecurity. Students are being educated in startup financing which, when combined with the knowledge of calculating standard business loans, has resulted in a vibrant and rich startup community. The fact that the government and the private sector have joined hands when it comes to the training of their youth is truly turning Israel into a global cybersecurity powerhouse.
Israel’s cybersecurity success has led to several collaborations with the world’s superpowers and cooperations with smaller countries (e.g. Singapore), in the process leading to the creation of over 300 new cybersecurity startups and attracting a string of foreign investors.
The Big Investors
Where you have innovative startups, you have VC’s. During 2018, investments in Israel’s cybersecurity firms increased by 47% and crossed the $1 billion mark for the first time, placing their industry second in the world. Non-Israeli VC investors currently play the most dominant role, the vast majority of American investors followed by France, Japan, and the UK.
Non-Israeli VC investors participate in 65% of the deals (link to image)
When looking at the number of new startups, the fastest growing sector in the Israeli cybersecurity industry is data protection – which includes the protection of privacy and its related encryption software development. As Tel Aviv is currently one of the cities with the highest cyberattack rates in the world, this area is a hot-bed for investors.
The ever-larger growing demand for privacy, in part due to large data breaches over the past few years, have led to the new European General Data Protection Regulation (GDPR), which created a space for young entrepreneurs and investors to find and offer solutions to companies and organizations to comply with the rules and regulations as laid out. Gone are the days when young entrepreneurs only had to rely on basic WordPress hosted sites to gain a foothold online. Today, the next-generation solutions include advanced cryptography and a multitude of AI-based data governance solutions.
The biggest challenge faced by the industry today, not only in Israel but worldwide, is the continuing shortage of cybersecurity professionals. To keep up their current growth rate, the Israeli cybersecurity industry needs to employ 800 new workers every year and reports say they are already falling behind. Local as well as foreign Research and Development companies are vying for the best workers, as such the demand for data scientists and software engineers is at its highest, causing salaries to skyrocket and smaller organizations to look for talent abroad.
The industry is also suffering from growing uncertainty around new regulations and compliance, remote-working, the move towards cloud-based solutions and the multitude of new cyberattack possibilities as more and smarter devices connect to the internet.
As remote-workers can endanger an entire network’s integrity, industry security experts are advising that users always make use of the best web hosting companies, which ensure proper antivirus software and that they protect their identity on open networks. As the multitude of fantastic and new possibilities that new smart devices bring grows, so does the threat of major cybersecurity breaches and the importance of defending IoT.
The global cybersecurity market is expected to increase to around $248 billion by 2023 with the biggest growth driving factors cited as strict data protection directives and growing cyber-terrorism. According to a report by Crowdstrike, the lines between criminal and adversary nation-state activity in cybersphere are becoming blurred as both private and government-aided hackers, who are masters at avoiding detection, have access to the same tools and often times the same victims.
Luckily Israeli companies and the young entrepreneurs at their helm are schooled and educated to scale, adapt and go global. Several foreign VC’s are also throwing their weight behind additional scholarship and mentor programs for Israel’s youth, ensuring diversity in the tech world and new and exciting positions with high starting-salaries for individuals who might have been otherwise overlooked.