Jerusalem Venture Partners (JVP), the international venture capital firm led by one of Israel’s leading social and tech entrepreneurs Dr. Erel Margalit, marked the grand opening of the International Cyber Center in New York City’s SOHO neighborhood in Manhattan on Monday night, positioning the city as the next global cybersecurity capital.
The event drew guests from across the world, including officials, entrepreneurs, executives, and celebrities – actress and entrepreneur Gwyneth Paltrow sat down for a fireside chat with Margalit – and came more than a year after JVP was selected by the City of New York and the New York City Economic Development Corporation (NYCEDC) to establish its first international cybersecurity investment and innovation hub. The center is part of the Cyber NYC initiative, a $100 million public-private investment to transform the city into a global leader in cyber innovation and create thousands of jobs, in partnership with leading academic institutions such as Columbia University, New York University, CUNY, and Cornell-Tech.
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New York City, Margalit said as he took the stage to welcome attendees, “is the financial and cultural center of the world, the hub of media and information – it can also become the technology hub of the world.”
The JVP International Cyber Center, he added, “is a launching pad for innovative technologies, for a new era of cyber, moving from protecting countries and enterprises to defending democracies and individuals, creating companies that will change the world of tomorrow. This is the start of the next chapter in the success story that is New York City.”
JVP’s Cyber Center in New York, housed in a 165,000 square-foot space on Grand Street, will focus on supporting growth-stage startups, serving as their base, and providing them with access to clients, top investors, executives from leading multinational companies and experts in the cybersecurity industry with hopes of “creating the next billion-dollar companies” in the field. It is also set to play a major role in protecting cities, banks, utilities, and healthcare systems, as well as democracies, information integrity and the freedom of the individual, according to JVP.
“Our vision to transform the city into the cyber capital of the world, combined with JVP’s experience in driving change through innovation, creates a formidable partnership that gives rise to the next wave of cybersecurity startup success stories,” said NYCEDC President and CEO James Patchett in a press statement. “The opening of the new Cyber Center will link global cities and companies with New York City’s thriving cyber ecosystem and promises to create good jobs and innovative solutions in this booming field.”
During the on-stage discussion at the event, Margalit and Paltrow delved into a range of topics including the developing role of women in tech, the importance of cybersecurity technologies protecting societies and individuals, and even the MeToo movement in which the actress played a vital role.
Paltrow said that when it comes to advanced technologies, some new products and opportunities presented a “double-edged sword”.
“How would we all live if we knew that everything we did and said was public to the world. This raises a very interesting philosophical point. I do believe in privacy, and we are entering a strange point in time when people know far more about us than we feel comfortable, so we must work to ensure that protection of privacy as well.”
Israel’s edge in cybersecurity
“Financial institutions and banks are often the first to be attacked,” Margalit told NoCamels in a phone interview ahead of the big launch. “They need extensive protection, as do healthcare systems, critical infrastructure, and smart city infrastructures. But there’s also a need for protection for individuals – their rights, their identities, their privacy – and democratic systems.”
The cyber field, he said, is a “type of war” and “what Israel has to offer in this field is priceless,” Margalit said. Indeed, Israel has proven capabilities in cybersecurity and is widely recognized globally as a cybersecurity powerhouse with over 400 active companies and startups in the field as of 2019. Israel is also home to the second-largest number of cybersecurity deals globally in recent years, second only to the US.
Between 2013 and 2019, the value of Israeli cybersecurity exits totaled $11.3 billion. And last month, in the biggest deal for an Israeli cybersecurity company, IoT security firm Armis announced that it was to be acquired by NY-based Insight Partners at a valuation of $1.1 billion.
In addition, no small number of founders and leaders of Israeli cybersecurity companies served in elite intelligence units and thereafter developed protection concepts for civilian purposes.
Margalit cited companies like CyberArk, which offers a critical layer of IT security to protect data, infrastructure, and assets across enterprises, and ThetaRay, an Israeli startup that offers solutions for crime prevention, operational efficiency, and threat detection, as examples.
ThetaRay is a JVP portfolio company and one of the 28 Israeli and American startups currently based at the International Cyber Center (half of which are also JVP portfolio companies). Some of the Israeli companies already have a presence in the US and bring in revenue “and are looking to scale or expand and others were looking for that US presence,” Margalit noted.
Among the 28 companies are also Nanit, an Israeli-founded company that developed a baby monitor for the IoT era, Loom Systems, the developer of an AI-powered log analysis software platform which recently announced that it agreed to be acquired by US cloud computing company ServiceNow for an undisclosed amount, and Israeli predictive cyber threat provider Vicarius, which recently announced a $5 million seed funding round (led by JVP).
Controversial tech and moral code
In addition to the much-needed protection of industries and individuals, Israeli companies have also produced more controversial, even dark, cyber capabilities.
A stark example is Israeli cyber intelligence firm NSO Group, best known for developing a powerful, invasive piece of spyware called Pegasus that can access private data including passwords, web history, phone logs, contact lists, and text messages, and can monitor live calls from messaging apps. It can also turn on phone cameras and microphones to track events in the vicinity and use the GPS function to monitor a target’s location and movements.
The tech has been at the center of a number of high-profile cases including the 2018 murder of Washington Post journalist and Saudi Arabian dissident Jamal Khashoggi, and the targeting of journalists and dissidents in Mexico and other countries, according to extensive research by Citizen Lab, a research facility at The University of Toronto’s Munk School of Global Affairs. And late last year, WhatsApp filed a lawsuit against NSO Group, accusing it of being behind a malware attack that targeted some 1,400 people across the world, including human rights activists and journalists. NSO has disputed the allegations.
“In cybersecurity, there is defense and offense and when it comes to investing, we work with those who develop defensive capabilities and we don’t invest in certain kinds of technologies,” Margalit tells NoCamels.
Margalit added that although it is also important to have offensive capabilities, “as investors and as a country [Israel], we have a moral code, and democratic countries need to abide by this code,” and help preserve “circles of trust with clients and collaborators.”
Centers of innovation
Since its founding in 1993, JVP has raised $1.4 billion across nine funds, invested in more than 140 companies, and has overseen 35 successful exits including 12 NASDAQ IPOs with a total transaction value in excess of $20 billion.
Led by Margalit, the firm has also made it a mission to help build up cities as global tech centers.
In the southern Israeli city of Beersheba, JVP set up the JVP Cyber Labs to attract top talent and capital. In Haifa, JVP is part of a group that is set to develop the city’s technology and innovation ecosystem with an investment of NIS 50 million ($14 million) over the next four years. The goal is to turn Haifa into a major innovation center in the areas of digital health, energy environment, industry 4.0, and smart transport.
And in the northern city of Kiryat Shmona, JVP has partnered with the Israeli Ministry of Economy and Industry to establish a food and agriculture tech accelerator.
Margalit told NoCamels the International Cyber Center was modeled after JVP’s space in Jerusalem which also houses the JVP Media Quarter, a technological incubator that serves as a center for engineers, artists, creators, and writers, among others.
“To create a big hub of creativity and activity, you need a big physical space. It creates a unique energy. And when you have a city like New York – a big city with lots of people – you need a space to bring them together,” Margalit said.
This concept was elevated at the center’s opening event in New York on Monday night with the launch of the “Margalit Startup City” brand, which JVP said “represents a series of international innovation centers launched around the world, with Margalit Startup City New York being the anchor for global activity.”
The centers, the firm said, focus on the ability to “change reality by connecting innovators, bringing millennials and younger generations to cities, all while creating thousands of job opportunities that leverage the social-economic aspects of each city.”
“With a belief in the power of people, the centers will connect the designers, philosophers, musicians, mathematicians, and storytellers of the world to advance innovation and creativity,” JVP said.
Israel’s future influence
Margalit tells NoCamels that building tech hubs, like the one in New York, will help grow Israel’s influence and reputation as a tech innovator across the world.
“If you look at the last decade, it was technologists serving technologists. Today, we are seeing tech in different industries. For example, banking and finance need AI, they need advanced technologies to be where their customers are. In the food industry, there are developments on alternative proteins, drones for agriculture and so on, and we need to be working with these big companies in the food world.”
Margalit said Israel has great innovators in diverse industries such as software, semiconductors, AI, and of course cybersecurity, but it “needs to connect to vertical leaders” and “tap in to big transformations across industries and in cities all over the world.”