Israel’s Cyberstarts launches $300 million fund to help startups retain top talent
The fund will allow employees to exercise a portion of their vested shares once a year, without leaving their workplace and without waiting for an exit or an initial public offering.
“At Cyberstarts, we have always made it our mission to nurture and motivate talent from idea through execution – and that includes finding new ways to have deeply technical cybersecurity talent stay and thrive at our portfolio companies,” said Raanan. “With this new fund, we are hoping to go even further to support our portfolio companies – creating a retention tool that rewards employees with a way to participate in their company’s early success while staying focused on the long-term vision.”
Over the past two years, the global IPO market has been largely closed as an avenue to raise capital due to a high-interest rate environment, a global economic slowdown and sharp declines in technology stock values. Since the outbreak of war with the Hamas terror group on October 7, 2023, especially younger startups have been grappling with the ongoing call-up of employees to perform reserve duty, staff shortage, and funding woes amid the continued uncertainty about the duration and extent of the fighting.
Furthermore, the war spurred an outflow of Israeli tech employees and entrepreneurs. The number of workers in the local tech workforce, also known as the high-tech industry, declined last year for the first time in at least a decade, as the prolonged war continued to take a toll on the economy.
From the beginning of the war and until July 2024, the number of tech employees who departed Israel for long-term relocation increased and stood at about 8,300 people, or about 2.1% of the local tech workforce, underscoring deeper concerns about one of the country’s most important sources of tax income.
Cyberstarts was founded in 2018 by Raanan, an early investor in cloud security unicorn Wiz, which is being bought up by Google for a staggering $32 billion. The VC started with an initial fund, Cyberstarts I, of $54 million. To date, the VC firm, backed by Sequoia Capital, has raised more than $1 billion in capital commitments across six funds and has invested in 30 companies.
Cyberstarts’ portfolio companies account for about 50 percent of the global market cap of private cybersecurity companies. Among its portfolio companies are Israeli-founded startup Linx Security, cyber unicorn Cyera, and API security company Noname Security.
The fund’s additional investments are Israeli-founded cloud security startup Bionic, sold to US cybersecurity firm CrowdStrike for an estimated $350 million; Fireblocks, which has developed software to securely transfer assets across parties and wallets; and Axis Cybersecurity, which built a cloud security platform and was sold to Hewlett Packard Enterprise (HPE).
Raanan, a veteran in Israel’s tech scene, started out in the Israel Defense Forces 8200 intelligence unit, where he served for some 10 years. He later founded Sanctum, an application security startup that was later sold to IBM, and nLayers, which developed tech to analyze the behavior of heavy applications in databases of enterprises. nLayers was sold to EMC for $50 million in cash in 2006.
Sharon Wrobel