If you’ve been to Tel Aviv recently, you’ve most likely heard local entrepreneurs refer to Israel as “Startup Nation.” This name was coined by two American journalists who, in their 2010 book, explained how Israel turned so hi-tech-heavy (hint: skilled immigrants & mandatory military service).
But what you may have missed is Israel’s rapid transition from “Startup Nation” to “Cyber-Security Nation,” a transition that has produced a wealth of opportunities for angel investors, venture capitalists, and global corporations such as McAfee, Microsoft, IBM & PayPal, who have begun seeking acquisitions in the country.
In the last two years alone, CyberArk IPOed at USD 500 million (it is traded today at USD 1.2 billion); IBM acquired Israeli security startup Trusteer for USD 800 million, and Microsoft acquired Aorato for USD 220 million and Secure Islands for USD 150 million. To name just a few exits (there were many, many more).
Israel’s journey to the forefront of cyber- security innovation dates back to the founding of CheckPoint by Gil Shwed in 1993.
Shwed, who was then a 25-year old graduate of the 8200 Elite Technology Unit of the Intelligence, recruited his army “buddies” to become the first employees of the company.
CheckPoint’s success as the inventor of “Stateful Inspection” or the “Firewall” created a domino whereby the CheckPoint founding team spun off to create their own companies (Imperva & Palo Alto Networks). These successful security entrepreneurs became active angel investors, thus creating a “virtuous circle” in the Israeli security ecosystem.
Fast forward twenty years, and the CheckPoint Domino Effect has given birth to over 300 security startups in various cyber-security domains, including industrial cyber-security, web application security, user behavior analytics, biometric authentication and even car cyber-security.
Israel’s booming cyber-security ecosystem, which attracted as much as 11% of global funding and produced over USD 6 billion in sales in 2014, has been driven largely by an unusual supply of talent that comes out of its top military units. Shwed’s 8200 unit is just one of those units; others include the Cyber- Security Unit and the Software Unit.
These military units pre-screen and train young high school graduates to become tech leaders. At 18, these guys and girls confront complex technological tasks that have real-life implications, to say the least. The structure of these units is unique to the extent that they are often non-hierarchical and welcome the critique of younger members. In effect, these units operate almost exactly like startup incubators.
One of Israel’s most fascinating contributions to cyber security innovation is in industrial cyber-security.
The domain of OT (Operational Technology), as opposed to IT (Information Technology), has seen the rise of a few very successful Israeli startups in the last couple of years. These startups’ uniqueness is their ability to connect to industrial networks in a non- intrusive manner and detect anomalies in the network. In light of the rise of industrial connectivity both in the US and Europe, these Israeli startups have attracted a lot of investor and customer attention.
Another Israeli forte has been in User Behavior Analytics, an emerging field in the cyber- security space. Israeli startups have learned to correlate log data with active directory data in a way that automatically points to rogue or suspicious users (employees) in a company. Considering that 82% of cyber- attacks involve stolen user credentials, these startups have grown incredibly fast.
Israel only is 3.5 hours away from Europe, and the wealth of security innovation found in a few square kilometers in the country is simply unparalleled. As global connectivity rises, Israel will continue to produce some of the world’s most innovative and protective state-of-the-art cyber-security solutions.
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Shira Kaplan is the Founder & CEO of Cyverse, a business development & investment firm based out of Zurich and Tel Aviv that focuses on Israeli cyber-security startups. She is a graduate of the 8200 Unit and Harvard University. She is available at [email protected].