Why VCs Are Calling Israel the ‘Cybernation’

B2B-Revenue-Acceleration---28.-Ofer-Schreiber-–-YL-Ventures1

It wouldn’t matter if you listened closely or not. If you’re in cybersecurity, you know about the innovation pouring from Israeli companies. We wanted to know exactly why Israel’s cybersecurity market is so strong, and what we can expect in the future.

On this episode of the B2B Revenue Acceleration podcast, we talked directly with Ofer Schreiber, a partner at YL Ventures.

YLV is a $140 million fund specifically focused on Israeli tech, and specializes in cybersecurity.

Here’s what Ofer had to say:

Cybersecurity is a Hotbed for VCs

Cybersecurity is a hot topic globally as hackers are getting more and more sophisticated. Security experts are in high demand.

As communication tech accelerates, the demand for cybersecurity increases with it.

Every time a new technology changes the market, the demand for security infrastructure follows.

Take the cloud, for instance. Just a few years ago, enterprise companies started migrating toward the cloud.  Young cloud security companies soon followed.

The same is happening with IoT: As the IoT space has begun to take center stage, IoT security concerns have risen as well, and new startups are merging to fill the void.

What Makes the Israeli Cybersecurity Market so Strong?

Ofer said plainly, “Israelis are visionaries. They consistently have the ability to foresee what will be the concerns within next few years.”

Specifically, Ofer pointed to the Israeli Defense Forces. With their elite units, such as their intelligence corps and the renowned Unit 8200 (Israeli equivalent to the NSA), Israel is pumping out a huge volume of talented cybersecurity experts.

To Ofer, there is no better training ground than the IDF for incredibly skilled cybersecurity experts.

How Does a VC Choose Who to Invest In?

When you have VC around, you have to ask them how they choose their investments.

Ofer specifically pointed to a few components:

  1. Founder background: YLV does a ton of research on not only the startup, but its founders as well, before they invest. They peer into the background of the founder to learn where they’ve worked and how  their experience bring innovation to the market.
  2. Market: They tap into their huge network of CISOs across many Fortune 500 companies. Before they invest in any startup, they put the founders in front of at least 10 to 15 ideal customers to explain their product. YLV then asks for critical feedback.

Don’t Build a Company for an Exit, Build It for Sustainability

“Great companies don’t get sold. They get acquired.” You’ve heard that before. But you don’t build a company to get acquired, you build it to be sustainable. Of course, if you are doing something right, you’ll attract attention along the way, but that’s not the focus.

As far as whether to sell or grow, It’s a tough decision with no clear-cut answer. Ultimately, Ofer said it’s the founder’s decision. YLV will advise, but, if a company is getting an acquisition offer, it’s because they’re doing something right, and the founder  should be trusted. “The founders are the heart and soul of an organization,” said Ofer.

The Importance of Culture in an Acquisition

If a company is acquired, should it operate as its own entity, or meld with the purchasing company?

This comes down to culture. The last thing any acquiring company wants to do is takeover a startup just to crush it. They must determine the compatibility of the two cultures. Do they share the same values? Are both the startup and the larger company agile enough to blend together?

If the cultures are highly compatibility, then integrating the startup into the larger company will ultimately provide a high level of synergy. In this case, the larger company should swallow it and turn the two into one function, said Ofer.

Otherwise, and especially if the larger company suffers from clunkiness or lack of agility, they should both operate as separate entities.

Conclusion

That’s inside the mind of an Israeli cybersecurity Venture Capital firm.

If you want more from Ofer, you can check out their website here.

To hear this episode, and many more like it, you can subscribe to The B2B Revenue Acceleration Podcast.

If you don’t use iTunes, you can listen to every episode here.

 

Posted January 23, 2019

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