Cyberstarts: A Cyber VC Powered by Cybersecurity Founders

Investment in Israeli cybersecurity startups is booming. According to reports cited in Forbes, in 2018, Israeli startups received almost 20% of global VC investments in cybersecurity. Last year, Israel surpassed China as the hottest spot for cybersecurity VC investments outside of the US.  Into that competitive arena steps a player with a unique business model: Cyberstarts, a $50 million VC that focuses on early-stage Israeli cybersecurity startups. It’s the first, and possibly only cybersecurity VC built and run by Cyber-rooted entrepreneurs.

I’m Daniel Karp, and I lead Cisco’s investments and acquisition efforts in Israel and Latin America. I’ve spent over 15 years in the tech industry, a career which began in the intelligence corps, working with some of these technical whizzes who made this Cyber wave possible. Cyberstarts caught my attention quickly, as so many of the people involved are considered world-class experts, and have began their careers in the same military intelligence unit. During a super hectic Cyberweek, I had the privilege of speaking with the gentleman who started it all—Gili Raanan, Cyberstarts’ founder, and General Partner.

 

On Gili’s Beginnings:

“Sequoia backed my first company in ’98. We built the first web application security firewall, and that business was sold to IBM. I’ve been an entrepreneur and CEO a couple of times. I started a company in the data center automation space, NLayers, which was sold to EMC, and I joined EMC as the Leader of Strategy for the software division, which is now part of VMware. Prior to those two ventures I worked for  the Israeli equivalent of the NSA.”

 

On the advantages of a VC lead by Cyber entrepreneurs with a proven track record:

“We (Cyberstarts) partner with and clustered together around 35 entrepreneurs, such as Shlomo Kramer and Marius Nacht of Check Point, Amichai Shulman of Imperva, Mickey Boodaei and Rakesh Loonkar of Trusteer, Nir Zuk, of Palo Alto Networks, and Assaf Rappaport, of Adallom. All of them have built successful large companies in cybersecurity. Together we work as a powerful network to help (bright entrepreneurs) in the very, very challenging journey of starting a new cybersecurity business. I found myself surrounded by people who invest in the fund not just their money, but mostly their tremendous commitment, passion, experience, and expertise. We do our best to build, based on our mutual experience, a support system for entrepreneurs.”

 

On Cyberstarts’ unique request to entrepreneurs:

“The first thing we ask (entrepreneurs) to do, beg them, actually, is to stop developing the product,” says Gili. “We try to focus the conversation on the pain points and better understand their vision and what problem they want to solve versus what solution they want to deliver….and typically, the pain points are around people and their shortcomings.”

cyberstarts danielkarp - Cyberstarts: A Cyber VC Powered by Cybersecurity Founders

Cyberstarts Founder Gili Raanan (on the left) with Daniel Karp.


 

Why pitching products is a bad idea:

“First of all, I partner with people. And we know that, even if they come to the meeting with a well-defined pitch around a very specific product, two weeks later, it would be a different product, and in two months, the new product would already be the old product. So there’s no point, at this phase, to focus from the get-go on the solution. I think that it makes the whole conversation very different than the typical founder-investor conversation which they would normally have.

 

On pain points:

“One of the things I promised myself years ago, and I try to follow that guideline ever since, is to leave innovation and ideation to the entrepreneurs. I think that, in a little game we play, each of us has a role.”

 

What should be the entrepreneurs’ single focus:

“Clarity of vision. Being very, very precise in explaining, first of all, themselves, and then, their teams, their investors and customers. Who are they? Why is this company an important one? Why should customers care about their company? Why should investors care about their company?”

 

On AIs role in cybersecurity:

“I’ll shock you with an answer that the utilization of AI is extremely low, and it would very likely get higher at a much slower pace than people anticipate. This is because we are dealing with very, very complex problem sets and technologies. Nontheless, I do expect to see a better, broader, and more efficient utilization of machines in general, and AI in particular, specifically in cybersecurity. That is because our customers, and going back from a solution to the problem, they suffer immensely from a lack of talent and very laborious manual processes that they need to automate. So there’s a need. And when there’s a need, the solution will come.”

 

My Closing Thoughts:

Think about it. A fund backed by Gili with the help of Cyber entrepreneurs, who all put money into the fund, and it aims to help Cyber entrepreneurs. That’s not just a unique VC model, it’s a fantastic way to pay it forward and advance the industry. What equally impresses me is the value Gili places on long term vision instead of quick solutions; his entire business model depends on it. Moreover, there’s something refreshing about the approach taken here – find the right team and entrpreneurs, make them leave their keyboards and instead, have them meet the market and learn about the challenges rather than disctate an unnecessary solution. Keep your eye on Cyberstarts; I’m certain you’ll be reading more about them soon.

 

 

About the author:

Daniel Karp joined Cisco Investments in 2013 and is currently focused on investment and acquisition opportunities in Israel and Latin America. Before coming to Cisco, Daniel Karp was a Senior Strategy Manager at Microsoft, where he was responsible for the strategy of Microsoft’s Startup Business Group (Microsoft’s internal Incubation projects arm), and Microsoft Research, focusing on areas such as NUI, Communications and Collaboration, Robotics, 3D Printing and Machine Learning. Prior to that, Daniel worked as a Product Manager and Product Marketing Manager at Microsoft’s Windows Azure (Public Cloud). Before Microsoft, Daniel worked as a Venture Capital Associate at Amiti Capital and held various engineering roles at Comsys Communications (acquired by Intel) and Saifun Semiconductors (acquired by Spansion).

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