In a year when the world suffered an $81 million central bank heist, a massive e-mail leak that may have altered U.S. elections and a successful cyberattack on a national power grid, investments in Israel’s cybersecurity industry jumped 9 percent in 2016, says a new report from Start-Up Nation Central.

Amounting to about 15 percent of all capital raised by the industry globally, 365 Israeli cybersecurity companies raised a total of $581 million in 2016, aBottom of Form

ccording to figures based on the non-profit’s data platform and tech industry database PitchBook.

The report said that funds have already been successfully raised by about a quarter of the 65 Israeli cyber start-ups founded last year.

Cyber tech is often touted as a growth engine for the Israeli economy by Prime Minister Benjamin Netanyahu. Drawing on expertise and experience gleaned from the country’s elite military intelligence forces, the country’s cyber industry is maintaining its status as a global leader, the new research suggests.

“Israel is at the forefront of innovation in cybersecurity” as entrepreneurs who completed their mandatory military service “uniquely bring their cyberwarfare and cyberintelligence expertise to the commercial sector,” said Avivah Litan, a vice president and analyst at Gartner Research.

CyberArk Software Ltd., which focuses on privileged-account security within corporate networks and Check Point Software Technologies Ltd., a pioneer of network firewalls, is a leader in its field and both companies are Israeli.

Joint cyber research with Israel would be facilitated by a new U.S. legislation that was approved last month. According to the MarketsandMarkets research firm, from $122 billion last year, the global cyber security market will grow to more than $200 billion by 2021 and therefore the stakes are high.

Huawei Technologies Co. acquired Hexa Tier Ltd. and Volkswagen AG started Cymotive, a security solution for connected cars, in a joint venture with a former head of Israel’s General Security Service, which shows that multinationals also are expanding their presence in Israel.

According to the report, up from one quarter in 2015, more than one-third of funding for Israeli cyber companies came from corporations last year. In addition to venture arm of Israeli military security company Raphael Advanced Defense Systems Ltd, investors included Deutsche Telecom Capital Partners and Singtel Innov8 Pte.

Yoav Tzurya, a partner at Jerusalem Venture Partners said that Israel needs to capitalize on that advantage to make the local industry into a significant global player.

“There’s no doubt that Israel’s competitive advantage in cyber stems from the military, but the question is if this advantage is being exploited to its fullest,” Tzurya said in a phone interview. “The answer is no.”

While contributing to national security, some sort of framework that would allow soldiers to build their own companies need to be developed by the country, he said.

“To build an industry that will draw more money and grow, we need to create a wide pipeline,” said Tzurya, who runs Jerusalem Venture Partners’s Cyber Labs in the southern city of Beersheba.

Exits fell by one quarter in number and about 50 percent in value terms, even as investment grew last year. Rather than allowing themselves to be acquired for relatively small amounts, companies are choosing to take more time to grow and this is indicated by the report.

(Adapted from Bloomberg)

Categories: Economy & Finance, Entrepreneurship, Strategy