B2B Revenue Acceleration
B2B Revenue Acceleration

Episode · 3 years ago

28: State of Affairs: Why VCs Are Calling Israel the ‘Cybernation’ w/ Ofer Schreiber

ABOUT THIS EPISODE

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.

You were listening to bb revenue acceleration, a podcast dedicated helping software executive stay on the cutting edge of sales andmarketing in their industry. Let's get into the show him. Welcome to beto be a review acceleration. My name is alliums and I'm yet they withOffen Shreebo from why a venture. How are you today? I'm great.Thank you for having me. That's a pleasure. So today we will betalking about the states of east, trends cyber securities market before we going tothe detail. And you please tell us a little bit more about yourself,your company, why, your venture and your rule within way your venture?Yeah, absolutely so. My name is offen Shaib. I'm a partner inwild ventures. We are venture capital firm with offices in Silicon Valley and TelAviv, Israel, who invest in Israel startups in early stage, is setstage and mostly, mostly in Cyber Security. That has been our almost exclusive focusfor the past few years. We've been working very closely with all ofthe folio companies, providing the value and everything they can. We build avery normous network of potensial customers and partners and fall on financing all the strategicsand potential acquirers in the cyber security world in the US and we're providing accessto Israel entrepreneurs in early stage to that network. Currently investing out of ourthird fund at the seventy five million dollar fund that we raised in twenty seventeenfrom doing extremely well so far. That's excellent and black to yet. Sowe are also, we do a fair amounts of walking the Saber Security Company, of the Sabe of security markets, I say, at the paractics,and we do see more and more trends. One more growth coming from the sabersecurities market, dis right. So we see a lot of Israeli player. Israel started coming into the market and actually being quite successful, and I'msure you you follow that growth quite closely, walking in that industry and working bettercapital. So what an interested to...

...one er some from your perspects evenand from your perspective of being so crused that market and probably speaking to thepeople on the day days. Is what makes this Reeli Sibo securities market sostrong and walk investing in for companies such as way ventures. Yeah, so, first of all, I fully agree with what she said. Obviously weare the venture capital from the focus and Israeli investment in summer security. Sharethe feeling? No, from if you look at the person for all,Serber security is still a very strong market in general, globally very hot.Space security challenges are just getting more and more complex and adversaries, you know, the hacker, getting more and more sophisticated. So security is a bigchallenge and a big market. And Israel in general, as you may know, well calling it a start up nation. Israelis is a hard med for innovationand technology in very wrist fields, but now these days, we tendto call it cybernation, and the basis of Israel's dominance in the cybersecurity field, from my perspective, is the IDEF, Israeli Defense Force, just the sheeramount of talented people that coming out of the of the ideas and specificallythe intelligence corps, from a lot of people are familiar with the unit calledeight two hundred, the equivalent of the American a Y, say, andtechnological people that served their game real world experience to the most cutting edge andinnovative cybersecurity landscape. They deal with the hottest technologies and doing really amazing stuff. This is, I would say, that this is the best training inthe world to become a cybersecurity expert and it's in a very tight and restfulenvironment. A lot of entrepreneurial DVD is are being done in those places andthese people, after they get out of the army, they tend to becomingto produce themselves. They builders, they want to do something of their ownand they create their own start up.

They take their own very unique setof skills in order to develop the right solutions that we solved real problems inthe cybersecurity world. So I think that makes not extense. We see Godsent. We have to get at the four clients, but telling is thebackground of the company on the reason why the technology came up close splace,because they were walking to see security forces protection. Process of the development isright and then the almost spin up the solution as to a product that canthen be sold towards a company, the company that will we see the sortof cybers rights as a government or a country may have, so that thatmixer. That makes a lot of sense in that and I think we arewe do see a lot of the startup being created on the basis of alwaystrying to innovate for, as you say the beginning of your of your ownswer to me, innovate in always changing, fighting the next trap. So it'snot just doing the commodity, but it's also creating industry solution, findinga new way to fight cyberspread, which is which makes a market very interesting. Coming back to an article that you published recently intech crunch, on outthe shrining Saber security industry performing to some of the eighteen, one of thestaffs that cut my eye was an increase of seventy six persons in funding foremerging tech companies or startups, as these growth come from more noticeable innovation.From your your belief or what are the technologies that's received the eyes amounts offunding and also why? Yeah, so this is the fourth year that wepublished ter annual report, which is called state of the CIBER nation reports.We're in a very unique position that we see, I would say, howdored percent of every security startups that are being founded in Israel and that areprogressing in Israel. So we get a lot of data and and we findsome very interesting insights and we published every in general, Israel entrepreneurs are knownto be visionaries that's not just in cybersecurity...

...but in general and specifically when wetalked about Cybersecurity, I think that is relatant. Nurse tend to have theability to foresee what we be the biggest challenges in the cybersecurity world in thenext few years. And once they do that, they come they have theright skis and the right technological background to come up with the right technologies.And when we and when we look at all the new startups that were foundedin Israelian in two thousand and eighteen and we and the ones that already gotfunded, I would say that there are several trends that you can see.The first is that the world just becoming more and more connected and the paceof innovation, in the pace of adoption of new technologies, it just beingincreased. Okay, so, as organizations adopt new technologies, only a coupleof years later so they started to realize that they lack security. So,for example, until a couple of years ago, enterprises were migrating slowly andslowly to the cloud. Then you saw new category of cybersecurity start ups thatare dedicated your cloud environment. And these years we see it in Iot.Okay, there are different categories of Iot, of connected devices that are being introducedto the world. These devices are very vulnerable to cybersecurity attacks. Sowe saw this year's several categories within Iot and got funded and we saw alot of evity. And, for example, medical devices, we saw several companiesthere, and automotive now, connected cars and autonomous vehicles to these arethese are the trends that we see. More the tax surface is being changed, there are more and more connected devices, more and more opportunities for the badguys, for say, to attack, and this is the right place tocome up with innovative solutions that are very adequate to these new lens makesnot expense. So pushing thing to that is in no environments that is alwaysevolving with lots of innovasion coming. You mentioned clown. Mention all these thingsthat are currently happening and reach one more...

...comple us. The grounds of movingto the problem obviously communicate things, but how do you guys keep on topof the stick, buge innovation and make sure that, I guess, youdon't invest to earlier to late in a specific Verticolo, in specific table solution, right? So you know we're since that investors. So invest as earlyas possible, literally in two or three entrepreneurs with a powerpoint presentation. That'sthat's the stage at we come in an invest and we rely on several thingswhen we make those seeds stage investments. First of all, we rely onthe strength of the team, the fact that we have very good networkork herein Israel and we are able to understand what is the background of each morewhere he either served in the military or worked in the past few years.Adding of their background and when we look at the field, when we lookat the problem space is that they're aiming to solve, that's where we relyon our network, as as I mentioned in the beginning, we have vastnetwork of US based customers and mostly see cells chief information security officers of,say, Fortune five hundred companies and largest brands in the world. And aspart of what the diligence process, we always introduce entrepreneurs to send between tento fifteen customers, get their feedback and really do a very deep market validationprocess. And so even if there is still no product, just in anidea and general direction, we can reach very high level of certainty that thereis, that did there is a big problem and indeed the general direction thatthe entrepreneurs are going after solve makes sense and customers like it. And nowit's about execution and that's where relax. We rely on the on the scalesof the team and of course we partner with them and provide them a lotof value addctivities. So all these introductions and go to market support in theUS you cannot from some my next question, which is great. My next questionwas about how much ends you need...

...to be when you when you're investwith with the sea the seat stage, because we know that obviously at theseat stage you may have fantastic control product is being able from testing solution thegood to market can be difficult to you. You actually also the question. Sojust going to move on to what we see into some mateen and thequestion will suit question between setting or being acquired, those fekeeping the company,keeping do or building up a legacy, if you will. So in twothousand and eighteen we saw lots of company being acquired. Just just to mention, if you and I'm just looking about this in the friend market, butwe will have Davor being acquire by my bravel, the nine being acquired bycheckpoint sec do ight by wild to, just to mention with you, andI believe that from not from Prono, your conspective, if there is aconstant dinama between shock, the meetter long term makes it or building up legacycompany. So I guess what I'm saying is that what you do? Youbuild up a technology stopt to exit the technology start, or do you willthe technology started in the view that you will be very successful and potentially createyour own investment and go and I acquire your competitors to take on some moremarket share? So lookusher I've got for you is what are the science to? I don't sify if a company is ready to be stalled or if youshould keep investing in his growth to become more established and more present in themarket. Yeah, so this is this is an interesting question and of courseit's not. It's not related, just a cyber security threaded to any manystart up and any field in general. Right, I would say that it'seven more relevant cyber security because this is a very ecquiditive market, quas alot of men activity and we see that largest, large vendors, some ofwhich you mentioned, are or a bit struggling to innovate on their own andthey're very much relying on the cutting edge...

...startups of small startups to come upwith the next big things, the next the next generation solutions and bed bedthese companies within a much broader platform. So you kind of mentioned it earlier, but I would repeat the catch phrase that good companies don't get solved,they get acquired. Right and as an early sales investors and investors in general, I don't think that you want to build a company with a state ofmind of a potential exit. I mean you don't build a company to geta choired, but you always think about what's the best way to build asustainable business. I would say that in Cybersecurity specifically, it's quite hard becauseit's a very crowded space and there are a lot of a lot of bigcompanies, a lot of competition and a lot of patients to to get acquiredalong the way. Yeah, and you know when you're doing something right asa startup usually you grow and and you get noticed by the large vendors.Usually happens when you displace a large vendor in a big customer or customer thatstopped the decided not to purchase the big vendors product and in place and insteadget get the startups product, then you start to step step on their toesand get on their radar and that then they become very interested in the space. And you know, you reach a point in time when you when youthink whether it's now is the right time to sell, to get a quiredheard or Eider, to raise an additional round of capital and go the wayto the next level. And it's a very hard question. I mean thereis no guarantee. You know, you always have to analyze the market andproject and see see how your marker, how your specific monk it is goingto look like the next few years. So, just for an example,if if a large vendor is interested to require your start up, okay,if you say no, there's a big chance that they will buy your competitor. So I would that change the landscape. Maybe then it would be harder foryou to compete. That's something you need to consider. I will thelandscape look in the next few years?...

Maybe other companies we step into yourmarket and get some significant market share. So there are different elements that youneed to take into considerations when you make that decision. As mentioned there.It's it's not very easy and it's not a clear cut there. It's notlike a yes or no. But at the end of the day, andthat's from my our perspective as investors, think that basically it's down to Preneur'sdecision. It's the founders decision. The founders are the ones who are they'rethe captains of the ship. There the heart and soul of the start upand they're the ones with the vision. And sometimes we may have disagreement.You know, somebody thinks that we need to raise more capital and go allthe way. Another guy thinks that it's time to sell. You need tomake a good discussion and be very analytical about it, but the end ofthe day this is the founders company and and we try to be supportive ofany every decision that day they reach. Yeah, absolutely, but it's gotto make sure your life wreat you excited. But I do agree with you.I think it's a it's a very active markets, almost almost aggressive sometimes, the way the way we see we see big company going after that quisitionand trying to expand the port for you and because, by ways as well, we've seen that we've seen company at serving lots of companies at once withsin stems of the kinder time in the way they would they would make thatposition. But B it's interesting at the moment because we even see non securitycompany being involving doing some that position. So when you see your Palowel toacquire an as of security company comes almost it's okay. When you see arecall or a companies, you will not see as the security players, suchor even a Microsoft, acquiring and other security companies straight to where you realizethat, okay, this is this is this is such an exciting market ateverybody wants to have everybody wants to enter the play, if you will.But the next question I've got from you is them. It's part of theacquisition. So you mentioned companies are being...

...sold and some of those are beingacquired. What would you advise to an acquire if they were to real started? Because I guess the reason why I'm asking you the push just to stepback a little bit, we see two types of acquisition. We see acquisitionwhere almost straight away the full team of the STARTUS is leading, the startof the service team is leading marketing teams leaving Exeter, ex which is aworld acquisition where the start up is actually acting as a start to carry ondoing what they are doing within the large organization pain that people growing and theyactually use the resources of that large organization potentially good to be the clients exuchrights such. So I was wondering if you are a new device or thechoir when these are this is a good acquisition, or some one into what'sthe best way to not only make that acquisition but also to get the mostof the decosition. That's a very interesting question. I think that the mostimportant thing is company culture. Yeah, I guess that if the start upthat acquired, it means that they were doing something right, which means thatthey had something good going on, and the last thing a big company wantsto do is to swallow small start up and crush it and to something thatyou sadly we see, we see sometimes, and I think that the you askwhether a big company should embed the start up in their in their organization, or either keep it as as a separate unit, almost autonomous unit,under under the roof a lot of different the resources apples. I would Iwould say that this is a mostly about company culture. If the if theacquiring company believes that they have they share the same value use and that theycan, they're agile enough, in order to work together with this small unitof probly very skilled people, then the...

...synergy is high and they should swallowit and make it a one one function. I think that if there are alot of if the gap is thick, for example, you mentioned before thatyou see a lot of non security companies acquire security startups. So,knowing that, in that scenario there's probably a big difference between how the largecompany operates, in how the start up operates and how the entrepreneurs would liketo move you usually entrepreneurs, why, would like to move fast and bevery agile, and large corporations are struggling to do that. Yeah, soif, if, if the reality tends more to be like that, Iwould advise to keep the start up as a as an autonomous function that canenjoy all the resources of the large company, like says, sales force and marketingpower and so on. But if there is high synergy, if thereif it's a big security company that already acquired several startups and there's a lotof entrepreneurial mentality going on, so I don't see a big concern in that. So, just to conclude it, it's all about making sure that thissmall and talent and team is able to keep doing the good stuff that they'vebeen in the past few years and you need to enable them to do itin the best way and to enjoy the synergy of and all the good thingsthat the corporations have that small set of dog consider not agree with you singfor that. We appreciate you your time and in sight today. On thedeferent to bigger discuss now if anyone wants to connect with you, and nomore about what we've discussed. So I'll find out more about way. Evenhos. What's the best way to connect with you? Yeah, you can reachme out there on my email. My email is off o fe or atmy Adventurescom. Can read all about us, you know, website. I cansee all of all of our companies in our strategy and free to reachout. Okay, that's one. Not For w many things once again.Now it was great to have younger should...

...thank you very much. It's beena pleasure. operatics has redefined the meaning of revenue generation for technology companies worldwide. While the traditional concepts of building and managing inside sales teams inhouse has existedfor many years. Companies are struggling with a lack of focus, agility andscale required in today's fast and complex world of enterprise technology sales. See Howoperatics can help your company accelerate pipeline at operatics dotnet. You've been listening toBEDB revenue acceleration. To ensure that you never miss an episode, subscribe tothe show in your favorite podcast player. Thank you so much for listening.Until next time,.

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