Akamai's expected acquisition of Israeli cyber unicorn No Name Security for about $500 million is another sign of the local cyber industry's separation from Israeli high-tech.
While other high-tech industries are struggling to find funding, the cyber industry seems to have unlimited potential. Noname Security is about to be sold for about half its value in its latest round of funding, while another company, Cyera, announced last week that it would raise $300 million for the equivalent of $1.4 billion, perhaps signaling a return to the bubble days. This suggests that there is a possibility that For cyber security.
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Co-founder of Noname Security.
(Photo: Yossi Ziglar)
Cyera is the first cyber unicorn of 2024, and in the words of Yotam Segev, the company's CEO and one of its founders, it's time for cyber to move forward and there's no need to be afraid of big funding or funding. , he seems to believe. We seek and receive high values that remind many of us of the unicorn era. “Before, a $10 billion cyber company was considered huge, but now it's just another cyber company,” Segev said. It's true that Cyera has offered a funding round that is unusual for the current market. However, Segev's words do not necessarily indicate arrogance, but primarily an understanding that cyber is a market in demand.
Despite the war, Israel's cyber disengagement reached $985 million in the first quarter of 2024, according to data from research firm IVC collected during a cybertech conference. In 2023, the total amount of exits from Israeli cyber companies hit a new record high, exceeding $7.1 billion. This is a 65% increase compared to his $2.45 billion in 2022 and a 22.5% increase compared to his $5.5 billion in 2021.
Shay Michel, a partner at Merlin Ventures, which invests in early-stage cyber companies, believes there will be more retirements in the next year and that the easiest hires will primarily be re-entrepreneurs. “Looking ahead to 2024, repeat entrepreneurs will be able to raise initial capital at high prices. They will have relatively easy access to customers and hire employees. We expect this trend to continue in 2024. “Cyber exits can be low valuations for companies that were founded several years ago and are currently in trouble, and high valuations for companies that are in good financial shape. ”
Arms race over corporate acquisitions
When it comes to cyber companies, we are currently in the “platform era.” Whether it's a small start-up like Palo Alto Networks, CrowdStrike, Zscaler, or the Israeli company Wiz, cyber companies that want to maintain their big company status can't get enough of their own internal innovations. , always looking for the next technology. The local arms race was started by Palo Alto Networks, the largest cyber company in the industry today. Palo Alto Networks was founded by Israeli entrepreneur Nir Zuk and currently trades at a value of $90 billion. In a presentation released after the release of its annual report, the company laid out new goals for next year, specifying areas in which it wants to “expand”: acquisitions. Palo Alto is also considering offering some of its technology for free. Shortly after this statement, Palo Alto acquired two Israeli companies for approximately $850 million. The first was Talon Cyber Security for approximately $600 million, and the second was Dig Security for approximately $250 million.
These purchases sparked a buying spree by competitors in Silicon Valley. CrowdStrike, currently considered the No. 2 cyber company but not previously known as a buyer, has been rushing to make additional acquisitions in Israel, including Flow Security, which it announced about a month ago. It made an additional acquisition last September for $200 million. Bionic was sold for $350 million. Zscaler, the much smaller member of the group, acquired Avalor for about $350 million.
This arms race has set the local cyber industry back for years. Companies in the industry have long argued that they want to build companies that are relevant for the long term, rather than being sold early. However, most of the companies that were sold were acquired before they even attempted to achieve significant sales, had not yet established large marketing teams, and most of the proceeds were in the very preliminary stages. In most cases, the returns obtained by entrepreneurs and investors were very high, since they were founded at most two years ago, and there was not enough time to dilute their holdings.
Another Accelerator – Generative Artificial Intelligence
In March of this year, Israeli company Gem Security was acquired by Israeli cyber unicorn Wiz for approximately $350 million, with most of the purchase price going to retain the company's employees and founders. When asked why they agreed to the acquisition so early, Gem entrepreneurs balk at the fact that financial considerations and the money they raised weighed heavily in their decision. That never happened. Founded just two years ago, the company raised just $30 million and was sold for that amount, leaving tens of millions of dollars in each of its co-founders' pockets, but still. The future of the established company is guaranteed. technology they developed.
This fact is important to many entrepreneurs. They understand that the only way their technology will become important is by joining a large company that can facilitate or start selling their technology significantly. This is also the case with Talon Cyber Security, which develops a secure browser and was acquired by Palo Alto Networks. The company plans to offer this browser to all customers, likely for free for now.
Another factor that could shake up the cyber industry this year and accelerate the arms race is the introduction of artificial intelligence, especially generative AI. The capabilities this industry offers, while currently in their infancy, are rapidly being adopted by nearly every enterprise, and in addition to being disruptive technologies, they are also introducing new cyber threats that require new preparedness. It shows that it produces. Numerous cyber companies are now being established in Israel and around the world with the sole purpose of securing these new systems.
