Israeli Cybersecurity Companies Raised Record-Smashing $1B in 117 Deals In 2018

Israeli cybersecurity companies and startups raised over $1 billion equity investment in 117 funding rounds in 2018, setting a new record and marking a 47 percent increase from 2017, according to a new report on Israel’s cyber sector by Start-Up Nation Central (SNC).

The total sum of $1.19 billion in investments constitutes nearly 20 percent of the overall cyber investments made worldwide in 2018, second only to the US, according to the report.

The year saw more early and late-stage investment deals, a trend that is evident across the general Israeli tech sector, with the median size of investment at $6 million, compared to $3.5 million in 2017. “Like the rest of early-stage Israeli tech, …[fewer] cybersecurity startups are being established every year as the industry matures and companies stay private for longer periods before exiting.”

There were just three investment deals of $50 million or more in 2018, which accounted for less than 15 percent of the total amount invested for the year, as opposed to three (mega-)deals that accounted for 40 percent of the total in 2017. The investment rounds included Claroty, which raised $60 million, Exabeam, which raised $50 million, and KELA Group, which also raised $50 million.

Notable exits for 2018 included the acquisition of Dome9 Security by Check Point for a reported $179 million, and that of SECDO by Palo Alto Networks for a reported $100 million.

There was also increased participation of non-Israeli investors in the cyber sphere in 2018. Foreign investors, a majority American, were dominant players in the industry, participating in 65 percent of the investment deals, SNC said.

By the end of 2018, according to the report, there were 450 active cybersecurity companies in Israel, 60 of them founded in the past year (compared to 75 in 2017 and 82 in 2016).

The data protection and privacy subsector was the fastest growing subsector in cybsersecurity, according to the report which indicated that “the growing demand for privacy, plus a vocal public debate and the need for GDPR compliance, are attracting entrepreneurs and investors to next-generation solutions including AI-based data governance solutions, and advanced cryptography.”

There were also significant initiatives and collaborations in the cybersecurity industry, including the establishment of a new $85 million fund by cybersecurity think tank and foundry Team8,  backed by Walmart, Softbank, Scotiabank, Barclays, and Airbus, among others; and the partnership between the New York City Economic Development Corporation (NYCEDC), Tel Aviv startup network SOSA, and Israeli VC Jerusalem Venture Partners to launch cybersecurity hubs in New York City.

The report comes as Israel’s largest cybersecurity event, Cybertech 2019, opens in Tel Aviv this week, gathering thousands of industry leaders, top executives, venture capitalists, and government officials from across the world. The event will run over three days, January 28-30, at the Expo Tel Aviv, and is expected to draw some 15,000 attendees from over 80 countries.

Hundreds of startups, companies, and organizations will take part in the exhibition pavilion including the Israeli Mossad, the IDF’s elite 8200 Unit, the Israel Police’s anti-fraud Lahav 433 Unit, IBM, Microsoft, Dell-EMC, Deloitte, among many others.