In Cybersecurity, Israel Has Become a Breeding Ground For Billion-Dollar Startups

It is high time Ukraine follows Israel's path.

COVID-19 has caused over half of humanity to go online. Citizens are increasingly using their computers and mobile devices to communicate, pay for purchases, run businesses, educate their children and employees who are more likely to work from home now.

And almost all of this without a proper security infrastructure. The more massive the digitization, the more opportunities for cyber attackers and cyber fraudsters there are.

Israel and its unicorns

"Cyber” is not just about cyber security or cyber attacks. It is also about diplomacy, crisis management and new laws governing digital risks around the world. This could include cyber defense, artificial intelligence, medicine and cloud storage.

Israel is renowned worldwide for its technology and cybersecurity solutions. Why? Because both of those industries work closely together. Let's take a look at some numbers.

"The cyber business is a great business. It is growing geometrically because there is never a permanent solution, it is a never-ending business," said former Israeli Prime Minister Benjamin Netanyahu. And it's hard to disagree with him.

According to Israel's National Cyber Directorate, funds raised by Israeli cybersecurity startups in the first six months of 2021 exceed the amount aggregated by startups throughout the last year (a record $2.9 billion). The Israeli institution's data shows that Israeli firms got 31% of the total funds raised by cybersecurity companies globally withing the first half of the year. That's three times the amount raised in the same period a year earlier. It's thus somehow unsurprising that 20 Israeli cybersecurity companies were acquired last year for a total of $4.7 billion. Exports of cyber services from Israel reached $6.85 billion.

And that's not all: let's move on to the Israeli "unicorns" (the name given to private companies valued at more than $1 billion). More than a third of cybersecurity unicorns worldwide are Israeli. And in the last year there have been five more: Snyk, SentinelOne, Forter, Cato Networks, and BigID.

Why are Israeli cybersecurity companies growing so fast? Why are their services in demand?

First, because of our cyber reality. That is, cyber attacks. According to a report by the National Cyber Directorate based on data provided by Israeli companies and citizens, hacker attacks increased by 50% compared to last year. Of 9,100 cyber attacks reported, the most common involved hacking access to social media (60%), phishing (14%) and information theft from businesses and citizens (14%). Other cyber incidents included attacks on weaknesses in computer systems (3%), tampering with computer systems (3%), use of ransomware (%), disruption of functional continuity (2%) and bypass of identification devices (1%).

But the increase in attacks is not the only reason for the booming Israeli cyber sector. The secret is also in the ecosystem where companies are born and let grow.

Find out what kind of an Israeli cyber-ecosystem you are

Israel is a tiny country in the Middle East that boasts one of the most powerful military forces in the entire world. Why then invest even more heavily in cybersecurity?

The nuance is that since its founding in 1947, Israel has faced a complex environment and, shall we say, special neighbors.

On a monthly basis, the country experiences numerous cyber attacks on data systems and government websites. Meanwhile, international terrorism is evolving apace.

However, the need to protect oneself is not the only impetus for developing cybersecurity at such a frenetic pace. The ecosystem plays an important role. Israel's unique cyber ecosystem consists of large cyber companies (global multinationals with their own R&D centers), new startups, military training practices and startup development in the military Israeli accelerator called iHLS, and government support for both private and public cyber initiatives. Together, these components have created an effective community that is a cradle for new cybersecurity companies bound to become "unicorns”.

It all started with threats and challenges: over time, conventional wars with neighbors began to extend to include the digital space as well. Many things had to be protected: power plants, water supply systems, ports and other critical infrastructure. Israel found solutions and answers to those problems. The state created intelligence units that monitored cyber attacks against Israel, and the so-called "Unit 8200" that repelled them (and still does successfully to this day). This unit aggregated Israel's best minds and unofficially became the country's "secret start-up machine": many citizens who served there ended up founding cyber startups that are valued at millions of dollars.

Later, the government took matters into its own hands: it currently coordinates cybersecurity policies and invests heavily in human capital, introducing cybersecurity classes in schools, as well as bachelor’s, master’s and PhD degrees in cybersecurity (with relevant research centers created in at least three Israeli universities, i.e. Technion, the University of Haifa, and the Hebrew University in Jerusalem), motivating businesses to work and establish R&D centers in Israel based on private and public partnerships, while focusing on diversity in both people, and its cybersecurity ecosystem. Advanced Technology Park in Be'er Sheva is a great example of this. Through such policies and practices, the country is bound to continue to be a breeding ground for cyber solutions that are successfully marketed around the world.

Ukraine, rethink your (cyber) box

Articles in the media and speeches of politicians are full of theses about Ukrainian talents and number of graduates specializing in IT. But does Ukraine respect its human capital? Does it invest in its people, their ambitions, skills and experience? Perhaps. But it can do even better.

What lessons and ideas could Ukraine learn from the model of brotherly Israel? First, as the authors of the bestseller "Why Nations Fail" Daron Acemoglu and James Robinsonn claimed, a "virtuous circle" should be created:

(1) invest in people so that academia can create new knowledge;

(2) businesses will build on this knowledge and develop advanced solutions with added value in line with market needs and global demand;

(3) the defense system and the nation will use the new knowledge, solutions, and talent to meet the needs of both the nation and its citizens.

Olga Stoliarchuk, CEO of Israeli-Ukraine Alliance’s Kyiv Office, special for Liga.net