Cybersecurity and the World of Tomorrow

Picture of keyboard (source from Pexel)

                       Cybersecurity and the World of Tomorrow

Once upon a time in 1948, a country was born. The birth of this country wasn’t an easy one and
is still fraught with challenges from her neighbors. This country is Israel. However, given her
relatively short history, this country has proved to be a tough cookie to crack. As then, Prime
Minister Netanyahu pledged in 2010, today the country is one of the top 5 leaders in
cybersecurity. The country has made heavy investments and developed world class cyber-
security technologies that almost anyone with deep pockets are interested in.

The worth of cybersecurity market globally
Cybersecurity is not just about protecting one’s e-mail accounts. It is to prevent unwarranted
access to one’s personal digital assets, which includes bank accounts, social profile, pensions,
etc. The worth of every single individual with a digital footprint is immeasurable. However, the
worth of cybersecurity is. In 2017, this niche market is valued at USD 120 Billion. By 2024, this
market will grow to USD 300 Billion, according to Global Market Insights, Inc. Effectively, this
market has doubled its worth in 7 years.

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Picture of security camera art (source from Pexel)

Why Israel invests more in cybersecurity

Since biblical times, the land of Israel has been promised to kings and sought after by prophets.
Today, it is recognized by the United Nations, but not many in the Arab world. Hence, the love-
hate relationship Israel has with her neighbours means that she always needs to be on her
guard. As a country that is relatively small and limited resources, Israel has a dire need to
protect her borders on land, sea, air and the latest realm, cyberspace. Israel cannot afford to be
complacent in any of this area. Any opportunity could lead to a full-scale invasion by foreign
forces. Cybersecurity has the highest potential impact, as it can lead to mass panic and
misinformation.

In all this chaos, there is also money to be made. Given the potential Israel has in developing
latest cybersecurity technology, she can afford to sell or lease these to other countries and
companies that share similar concerns. This is a great export opportunity for Israel, as it is
simply bits of binary codes. The return on investment is immense, as the customers tend to be
loyal and long-term.

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How Israel develops its top talents

Israel’s challenging history has led her to investigate all forms of security from a holistic point of
view. Hence, Israel starts identifying its best and brightest minds as early as 12 years old from
schools. These young talents are encouraged to join coding clubs to learn new skills and
demonstrate aptitude. As they progress, the top talents are ear-marked for special training when
they enroll for their mandatory national defense program. At this stage, Israel puts these talents
through a rigorous physical and mental training regime. They also develop all forms of malware
and cybersecurity software. They are exposed to the latest technologies in the industry and
access to the best minds. All this hard work isn’t about only stick and no carrots. At the end of
their national service, these top talents have job offers lined up with top tier companies. They
also command top salaries that make the average Israeli worker teary. Hence, this whole
ecosystem of public-private relationships ensure Israel has a continuous top performing pool of
talents that contributes towards its cybersecurity industry. This is evident with the growing
number of founders in Israeli cybersecurity start-ups come from post-IDF with private sector
experience.

Picture of codes (source from Pexel)

What’s happening with Israeli cybersecurity companies

Today, the landscape of Israeli cybersecurity firms is interesting and exciting. In 2018, the total
amount of funding for Israeli cybersecurity companies across all stages grew 22% year-over-
year to $1.03B. This growth has been consistent in the previous two years, both showing more
than 20% of investment per year. There is also a fierce appetite from investors to pump into
Israeli start-ups. For example, the two largest seed funding rounds this year were in the IoT

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security domain. VDOO, founded by ex-Cyvera entrepreneurs (acquired by Palo Alto Networks
in 2014 for $200M) and which develops security solutions for IoT vendors, raised an abnormally
high seed round of $13M. Toka Cyber has secured $12.5M seed funding from Andreessen
Horowitz and others, to develop and expand their IoT cybersecurity platform for governmental
agencies. These are no longer the outliers but the norms in investing in Israel’s cybersecurity
start-ups.

The future of Israeli cybersecurity industry

As money is pouring into the country and industry, the founders are also cashing out. The
acquisition of Sygnia by Singaporean holding giant Temasek was remarkable because it shows
that the Israeli cyber market continues to attract new classes and kinds of global strategic
players each year. In addition, Thoma Bravo’s $2.1B acquisition of Israeli cyber firm Imperva
made waves throughout the industry. Industry expert, Tsahy Shapsa, reflection on this situation
is accurate. As founders and co-founders exit from the scene, this allows them to be repeat
entrepreneurs to create bigger and better technology. This form of organic growth is exciting as
it creates a virtuous cycle. It also gives investors confidence as they know it’s the real deal that
they’re investing in.

Summary/Conclusion

Israel currently has all the right elements to continue to grow in cybersecurity. As our lives
becomes more connected and dependent on the internet, the threat of cybersecurity becomes
more prevalent. Israel is poised to capitalize on this growth. There are technologies that’s being
researched which could disrupt the cybersecurity industry, such as quantum computing and
quantum networks.

However, Israel 2.0 will be ready to adopt, adapt and advance with it.
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Thank you for reading my post. I regularly write about private market opportunities and trends. If you
would like to read my regular posts feel free to also connect on LinkedIn, Twitter or via Atlanta Capital
Group Investment Management.

Greg Silberman is the Chief Investment Officer of ACG Investment Management LLC (“ACGIM”). ACGIM
specializes in creating custom private market solutions for RIA/Family Office clients.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a
recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
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fluctuate and when redeemed may be worth more or less than when originally invested. Advisory
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