Israel's Cyber Entrepreneurs

15 March 2015

In today’s global cyber security market, Israel is considered a significant player in both R&D and in sales. This success is evident by the many R&D centers launched in Israel by global giants such as Lockheed-Martin, IBM, EMC, RSA, GE, McAfee, Palo-Alto, VMware, and more. The dozens of new startups being launched are attracting hundreds of millions of dollars in local and global venture capital investments; and Israel’s impressive export levels of cyber security services, now stands at about 5% of the global market.

A lot has been said and written about the factors contributing to Israel’s success in the cyber security market. This article will drill down one layer, beyond the titles and the technicalities, to illustrate the core characteristics of the Israeli cyber pro and how this standing in the global arena has been achieved.

This may be an unfortunate analogy, but the seeds for entrepreneurial activity can in some ways be measured and discussed in the same way that terrorists are – by capability and intent. For the cyber entrepreneur, capability is defined by the combined package of skills, experience and knowledge required to become successful. The intent, on the other hand, is his motivation to do so.

The Israeli cyber entrepreneur is the product of a unique environment that both drives such skill sets and creates the motivation to put these capabilities into action. These specialized skills are acquired by: education provided in high schools and universities; during the mandatory army service; and by working in the cyber security market for local and global companies. The motivation – created by the probability of higher financial compensation – is nourished by a social environment that endorses entrepreneurship and holds it dear. The financial eco-system is significant in that it provides substantial funding and support to entrepreneurs who have aspirations to achieve the Holy Grail – the exit – a significant financial compensation by means of an IPO or an acquisition.

The Intrinsic Layer
The majority of technological cyber entrepreneurs in Israel gained relevant experience and expertise during their service in the Israeli Defense Force (IDF). That experience is later applied to creating innovative cyber solutions and tools in the private sector. During military service, starting at the age of 18, young Israelis learn, and put to use, the tools needed to both safeguard and gain access to IT assets for various purposes. The main significant differentiating factor from commercial companies doing the same is that the IDF is operating in a non-for-profit and no-budget-restraints environment where the motivation is national security and embodies a sense of national responsibility for the greater good. This galvanizing combination provides results to some of the toughest problems and most impossible challenges as it pushes the game to a higher playground.

Beyond the technological layer that is being infused into these young IDF soldiers, they are also benefitting from invaluable lessons and hands-on experience (sometimes under fire) in leadership, commitment, mission-driven performance, professionalism, teamwork, collegial spirit, responsibility and discipline.

Cyber education in Israel is available and promoted on many levels – high school, undergraduate, graduate, and advanced academic degrees. In high-schools, pupils can attend dedicated programs for cyber education promoted by the ministry of education, and some are in collaboration with the IDF. All universities offer academic degrees on all levels in cyber security, and also conduct their own research efforts by faculty members or cyber workshops and research institutes.

Cyber security is the day-job of more than 30,000 Israelis in over 450 companies, including startups. A career in the cyber security market usually means a higher than average income with significant room for advancement compared to many other high-tech sub-markets. I call it “day job” because it would not be an exaggerated assumption that more than a few of them are aspiring to create their own venture and are at various stages of doing so. In their day jobs, the cyber professional is gaining valuable experience and expertise in commercializing his knowledge, engaging clients, understanding budget restraints, learning key business trades and gaining in-depth knowledge of the market for cyber security – local and global.

A group of soldiers in the rigorous cyber defense course. “Cooperation is also quite important because the reality is not that each person sits by his or her desk working alone – we must work as a team.” (Photo: Israeli Defense Force) 

The Social Layer
The entrepreneurship spirit in Israel is being developed and supported by the vivid, self-nurturing cultural atmosphere of a startup nation. In a country where coffee shops are overcrowded with groups of people working on their laptops, entrepreneurship is the hottest profession. As more people become entrepreneurs, others are inspired to assess similar paths. The success stories constantly announced over the media of young startups raising millions of dollars in investments, or even better – being acquired for hundreds of millions of dollars, are exciting – sparking minds and planting the seeds of motivation.

The cyber community in Israel is both diversified and active. Members of this community have diverse interests and come from a wide range of backgrounds: employees of established companies and of young startups; officials from many government agencies and offices; investment professionals seeking profitable opportunities; clients and users of cyber security technologies; academia and research institutes staff; and more.

Despite the size and diversity of this group, the atmosphere is generally more of cooperation than competition. Attending one of the many cyber security conferences and trade shows in Israel actually feels more like a class reunion than a battlefield of corporate espionage like one might expect. No one will sell or trade commercial trade secrets, but the general atmosphere is collaborative – “who can I ask for help”... “let’s see if I can help you”... “I can put you in touch with”... will be dominant in the discourse. In fact, reaching out to cyber peers for assistance is not uncommon when a cyber-pro or entrepreneur is faced with a problem that despite his best efforts he is not successful in solving. The synergetic nature of this social environment is a key component in Israeli success. This community is very engaged and active beyond the daily activities, with opportunities such as the many conferences, trade shows, and various local networking meetings.

The Money Layer
Money makes the world go round, and the cyber security market too. Funding is a key and substantial component of the needed capabilities to do most anything in today’s modern world. The Israeli cyber security sector enjoys investments form local and global venture capital funds, joint ventures, and strategic investments from local and global corporations, which results in impressive revenue for its goods and services sold in Israel and exported globally.

The number of global corporations and venture capital activity active in Israel in the cyber security markets is astonishing. Venture capital funds, high-tech accelerators and incubators are seeking promising entrepreneurs and startups to invest in hoping for a significant return on their investment. Large cyber security corporations are also looking for those “promising guys”, and seeking to gain untapped market share by acquiring or investing in them.

Financial success stories are a major contributor to the motivation of Israelis to become successful cyber security entrepreneurs. For some time now, headlines in the Israeli media often focus on Israeli companies generating profits, or being acquired for substantial amounts of money, or attracting significant investments. As more and more cyber pros witness these massive financial incentives, especially related to successful entrepreneurs, this success becomes self-nurturing.

The Government Layer
The Israeli government is an important and positive influence on the local cyber security market – national cyber-security related agencies, national R&D programs, government-corporate cooperations, government funding for R&D, government support for cyber companies, educational programs, and more, are all part of the official policy and strategic plan of the government to position Israel as a lead player in the global cyber security market. This government support is contributing to both the capabilities of the cyber professionals and to the overall incentive to join the market and succeed in it.

In conclusion, cyber security is a growing, multi-billion dollar, technology-driven market providing significant incentives to successful business endeavours. The market is expected to grow with the internet, particularly as IT becomes more and more embedded in to all aspects of daily life. Israel is fortunate to have multiple unrelated factors that, when combined, form the solid foundations of a successful cyber security industry.

Noam Gilutz is the Founder and Managing General Partner at DS Strategic Partners (DSSP) in Israel. DSSP’s Investment strategy is focused on disruptive security and intelligence startups.
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