Why Do Cybersecurity Unicorns Flourish in Israel?

Numbers don’t lie. Israel has become the global hotbed for spawning private cybersecurity companies worth more than $1 billion each. We can point to five such creatures already: Checkpoint, NDS, Imperva, CyberArk, and Forescout. In an industry where there are probably fewer than a dozen of these kinds of success examples, this puts Israeli cybersecurity in rarified air. 

The obvious question becomes why does this happen in Israel? It has to be something besides coincidence, right? I’m here to tell you, yes, it’s more than coincidence. In fact, there are a handful of definite factors that combine to birth a cyber unicorn, and here they are.

Always Look for the Next Opportunity

To make a big splash in any industry you have to have the wherewithal to be on constant lookout for the next opportunity and then strike hard when you find it. While this advice might seem self-evident, the landscape is littered with non-unicorn companies that show how easy it is not to take this advice.

One that did was NDS. This company was paying attention a while back when hackers set their eyes on the cable television industry. As fake cable access boxes flooded the market, NDS recognized a hot opportunity to provide a complete end-to-end solution that addressed both the short and long-term threats. 

This is a cogent point to linger on. It’s not all about solving the immediate pain point – though that is a big deal – but continuing to develop products and services to follow up on the initial one. A unicorn wants to grab the current low-hanging fruit, of course, but also wants to set itself up as the company of choice again and again, years into the future.

You Need Sales and Marketing Unicorns Too

The reality is that your about-to-be-birthed unicorn company will not reach that lofty status on the basis of technical wizardry alone. If it were that easy, everyone would be doing it. CyberArk is a good example of this. Founded by a couple of military intelligence unit graduates, the company seemed destined to stand in the shadows of success until they found a CEO with a particular set of marketing skills who was able to translate what were obviously superior tech products into juggernauts driven by superior marketing also. 

This wedding of tech and marketing set CyberArk up for one of the most successful 2014 IPOs. And we shouldn’t leave out the effect of CEO Udi Mokady, a unicorn of a leader for sure. The lesson – technical genius, while necessary, can only take a company so far. Until you add well-planned marketing and sales strategies, and leadership to match, the path to unicorn status might be impossible to find.

Don’t Fear Partnerships

When you come up with a great new idea, you don’t want to share it with anyone. So you clutch it ever tighter to your chest and let no one have a peek. Guess what? This is probably not the way to turn your company into a unicorn. Let’s take another quick look at CyberArk’s path to success. One of its smarter moves was to create an alliance program with industry leaders such as Symantec, Intel, and many others.

Being able to share cybersecurity best practices with the leading industry thinkers creates a synergistic environment that creates integrated solutions and – wait for it – offers a better chance at transforming into a unicorn than going it alone. Hackers have been cooperating like this for decades. In order for those who oppose them to succeed, following suit is almost mandatory.

Wide for the Win

Before your company becomes a unicorn, it has to be profitable. And it better happen quickly. Profit secures a company another day, week, month, or year while trying to figure it all out. Part of this ties into the previous section – finding the right industry partners. Don’t forget about investors, though. Get a few of them committed early to the cause and it allows for more headspace to commit to solving product and service problems  rather than budgetary ones.

The bottom line here is to not diminish profitability. You’ve likely heard of the concept of a minimum viable product (MVP). This is where you shove an early version of a product to market before all the bells and whistles have been added. There are a couple of advantages to this:

1. A stripped-down product allows early customers to offer feedback on improvements.
2. Even if you can’t charge full price for this basic product, you can charge something and get the money flowing in.

Why Do We Need Unicorns Anyway?

Do unicorns serve any purpose other than being a freak of nature for bystanders to point and gawk at? Actually, they do. All we have to do is look at the numbers. In 2016, Israeli cyber-startups acquired by other tech companies added up to $662 million dollars. Nothing to sneeze at but a single unicorn like CyberArk was valued at $1.7 billion at the time. More than twice the value of all the smaller ones.

What we can take from this is that a unicorn can drag an industry into substantial growth by the sheer weight of its own size. Would cybersecurity stand at its current size (about $220 billion in 2021) without unicorns exploding into prominence along the way? Probably not. It would be growing but likely not so fast.

Final Thoughts

What does Israel have to do to keep a thriving, unicorn-friendly presence in the cybersecurity industry? The natural course of events for many has been to grow big, sell out to an even larger company, and then go public on the NASDAQ. Following this course, a homegrown unicorn can quickly find itself drawn away to a distant multinational corporation.

The key, as defined by some security experts, is to focus on keeping the R&D departments in Israel. That ensures that the hot and hungry talent continues to flow into the country, which is the secret to maintaining a fruitful unicorn breeding ground.