Navigating the Next Wave of Israeli Cybersecurity Highlights from YL Ventures’ Cybersecurity Panel at JOURNEY 2024

Navigating the Next Wave of Israeli Cybersecurity
Highlights from YL Ventures’ Cybersecurity Panel at JOURNEY 2024

At YL Ventures, we continuously collect data on the vibrant Israeli cybersecurity sector and have observed a resurgence in M&A activity in this sector, even amidst unstable macroeconomic conditions and one of the most challenging years in Israel’s history. Despite fluctuations in deal pricing, the frequency of transactions from the beginning of 2024 indicates that global players have a heightened interest in the local cybersecurity ecosystem. Their continued influx into the Israeli sector, seeking top talent and strategic partnerships, is a testament to Israel’s well-earned reputation for cybersecurity excellence. As we look ahead, cautious optimism prevails as the sector demonstrates resilience and adaptability.

The Israeli cybersecurity landscape is experiencing a period of robust transformation and growth. Driven by the abundance of innovative startups, the unparalleled Israeli technological edge and an economy that is slowly regaining its strength, we’re seeing prime conditions in the past year for a healthy and growing number of strategic acquisitions by global enterprises. This dynamic shift in the industry is poised to profoundly impact the competitive landscape. As we navigate the second half of 2024, I seized the opportunity to lean into the driving forces behind these trends and their implications for the future of Israeli cybersecurity by hosting a cybersecurity panel at EY’s JOURNEY conference in Tel Aviv. I was privileged to be joined on stage by a panel of experts: Dan Amiga (Co-founder and CEO, Island), Itay Frishman (Partner, Meitar Law Firm), Liat Hayun (Former Co-founder and CEO of exited YL Ventures portfolio company Eureka Security, currently VP Product Management & Research, Cloud Security at Tenable), Arik Kleinstein (Founder and Managing Partner, Glilot Capital Partners), Matthew Olton (SVP, Corporate Development and Strategy at Tenable) and Josh Kiernan (Partner, Latham & Watkins). Here are some of the highlights from our insightful conversation.

“There seems to be a disconnect between the geopolitical climate in Israel and the thriving Israeli cybersecurity sector, which, despite considerable challenges, has continued to flourish,” stated Itay Frishman (Partner, Meitar Law Firm). Itay described various factors that he believes contribute to the growth of M&A activity in Israel. He noted the broader economic recovery in the United States, which has allowed companies to enhance their offerings by acquiring cybersecurity startups and to enter the hottest and emerging categories in cybersecurity and seeking the best products, tech and talent. Once they decide to do so – they turn to the Israeli cybersecurity sector due to continued global perception of Israel’s resilience and technological prowess. 

Vulnerability and exposure management leader, Tenable, is one such example. As Matt Olton (SVP, Corporate Development and Strategy at Tenable) stated, “Tenable has experienced significant growth through strategic acquisitions in recent years. Current market conditions, coupled with the challenges faced by many companies during the past two years, are driving renewed interest in mergers and acquisitions.” As companies seek alternatives, combining forces with other businesses offers a promising path forward. The limited availability of financing options and the desire to leverage complementary technologies are further contributing to the increased M&A activity in the sector.

Large enterprises are driven to innovate rapidly due to the demands of maintaining existing products. To address this, they frequently turn to acquisitions to incorporate promising technologies from smaller, more agile startups. Liat Hayun, (Former Co-founder and CEO of exited YL Ventures portfolio company Eureka Security, currently VP Product Management & Research, Cloud Security at Tenable) shared her first-hand experience as the founder of a cybersecurity startup acquired by Tenable three years after launching. “In the case of Eureka Security, our success in the Data Security space made us an attractive target for Tenable, seeking to expand its cloud security offerings. M&A activities like ours play a crucial role in driving innovation and fostering growth within the industry.”

Serial entrepreneur Dan Amiga (Co-founder and CEO, Island), has a wealth of experience in founding cybersecurity startups, investing in them and selling them. He’s witnessed the M&A landscape evolving significantly, with many markets becoming highly consolidated. “This trend has forced larger companies to acquire remaining players in specific sectors, such as DSPM, to maintain their competitive edge.” He does see the unique advantage Israel has, due to its pool of experienced entrepreneurs who have successfully founded multiple companies. Their deep understanding of the market and proven track records make them attractive to investors and allow them to build substantial businesses. This ecosystem is fostering a cycle of innovation, as talented individuals gain valuable experience working at established companies and then venture out to start their own cybersecurity startups. 

Arik Kleinstein (Founder and Managing Partner, Glilot Capital Partners) knows the Israeli cybersecurity ecosystem from an entirely different era, as his cybersecurity-focused VC began investing in this space in 2011, similarly to YL Ventures. From his current vantage point, he sees the perception of Israeli cybersecurity companies evolving significantly since the early days of the industry. While initially focusing on downplaying their geographic origin, he believes Israeli startups have now established a strong brand reputation in the global market. “The increasing M&A activity in the sector, involving both traditional cybersecurity players and investors, is a testament to the talent and innovation coming out of Israel. The combination of exceptional entrepreneurial talent and the growing demand for cybersecurity solutions driven by technological advancements ensures a bright future for the Israeli cybersecurity industry.” Matt agreed, stating that, “My experience with M&A transactions in Israel has been consistently positive, largely due to the exceptional talent and ambition of the teams involved. In contrast to other regions, Israeli entrepreneurs often demonstrate a strong commitment to the long-term success of the combined company, taking on broader leadership roles and contributing significantly to its growth.” 

Josh Kiernan (Partner, Latham & Watkins) has been working with Israeli startups for many years, His office has a strong presence in Israel, serving a diverse client base that includes established cybersecurity companies and startups. He shares the panel’s optimistic outlook for the future of Israeli cybersecurity. “Recent M&A activity, coupled with the success of Israeli cybersecurity companies in going public, demonstrates the country’s positive global reputation in the tech market and the optimism surrounding its future. As the demand for cybersecurity solutions continues to rise, Israel is well-positioned to remain a leader in this dynamic field.”

As the Israeli cybersecurity sector continues to evolve, we foresee numerous Israeli companies growing independently and becoming standalone security giants in the global market. This is the ultimate vision YL Ventures and other stakeholders have for the industry, alongside a continuation of strong M&A activity as a driving force with a growing number of global players entering and thriving in the local ecosystem. The combination of exceptional talent, cutting-edge technology and global interest in Israeli innovation positions the country as a solid and sustainable leader in the field. Despite the challenges posed by competitive markets, economic fluctuations and geopolitical conflicts, the resilience and adaptability demonstrated by the Israeli cybersecurity ecosystem bode well for its future. As we look ahead, it’s evident that Israel’s role in shaping the global cybersecurity landscape will only grow stronger.