Opinion$41B in exits: Why Israeli cyber startups are a global powerhouse
Opinion
$41B in exits: Why Israeli cyber startups are a global powerhouse
New report reveals a surge in M&A deals, rapid growth in valuations, and the rise of Israeli cyber unicorns.
As a USA-based venture firm that opened our office in Israel last year, when the geopolitical scene looked quite different, we’ve remained bullish on the Israeli ecosystem for a reason. We have created a comprehensive exits report that examines all cybersecurity exits, IPOs, and unicorns in Israel from 2019 to now, to present and measure the realized success seen by Israeli cyber startups. We chose to examine this time period given the transformation Israeli cyber has gone through in these years.
The report, to be released on Monday, shows that the exit opportunity is rising for Israeli companies and investors, with $41B in aggregated value over the last six years generated through M&A and IPOs – including $4.5B in just cyber M&As this past year. Additionally, Israeli startups hold $61B in aggregate current valuation across the 20 active cyber unicorns who have yet to exit.
The opportunity is bright today for the Israeli startup ecosystem. The data we have pulled together shows the paths to exit for founders is stronger and faster than ever, both for early-stage and late-stage startups. This speaks to the strength of innovation happening in this country around cyber and key security categories.
Mergers and Acquisitions Create Opportunities for Israeli Startups
Our data shows that there have been 116 acquisitions of VC-backed Israeli cyber startups in the last six years, generating more than $23B in combined exit value and averaging a purchase price of 7 times the amount of funding raised in the company’s lifetime. Many of today’s acquisitions are startups that were founded during the COVID boom, such as the latest two – Paragon and Hexagate (acquired by AE Industrial Partners and Chainalysis, respectively), as well as other 2024 exits like Dazz (acquired by Wiz), Entitle (acquired by BeyondTrust), and NoName (acquired by Akamai).
When we look at the trends for these acquisitions, we see Israeli startups landing higher valuations and prices than in years past. For instance, this past year, 67% of exits were at or above $100M and the median exit size has risen over time, standing at $150M with an average exit size of $212M for 2024. What’s more, most exits above $100M used to be after growth funding rounds, but now, most (61%) $100M+ exits happen after just Seed or A funding.
These acquisitions are happening faster than ever before. Today, the average Israeli cyber startup acquired is only 3-4 years old, and the average time from founding to exit has decreased by almost 2 years for $100M+ exits on average. This could indicate that buyers are amenable to bigger buys or larger purchase prices, or that the value and quality of these startups has increased and therefore warranted a larger price.
Biggest Buyers and Investors in Israeli Startups
Our report analyzed the VC investment ecosystem in Israel and found that four early-stage firms specializing in cybersecurity had seeded 25% of all exited cyber companies in this time period: Cyberstarts, Team8, Glilot and YL Ventures. 72% of exits for companies seeded by these four VCs were at or above $100M. That said, there are many VC firms, both local and from around the world, who are making investments in Israeli investments and seeing success either independently or in partnership with these four early-stage firms.
On the buyer side, major USA-based corporates like Palo Alto Networks, Crowdstrike, Tenable, Akamai, and Cisco are exceptionally active in Israel. Check Point is the most active, having acquired 13 Israeli startups since 2019. But it is worth noting Crowdstrike has made 71% of its acquisitions in Israeli startups. The only private company with at least 3 acquisitions is Wiz, all three of whom were completed in the last 12 months. From 2019 to now, acquirers that signed the largest checks for Israeli cyber startups are Palo Alto ($359M average, $350M median) and Wiz ($283M average, $350M median).
While the Israeli cyber market is skewed towards exit via M&A rather than IPO, the opportunity is there. There have been few Israeli pure-play cyber companies to go public in the last six years, but IPOs present a significant opportunity for startups who want to go the distance, with a median valuation at IPO (for Israeli cyber IPOs since 2019) of $3.3B, 30X that of the average M&A exit.
A Significant Opportunity Ahead for Israeli Cyber Startups
While success is never guaranteed, the landscape of opportunity for Israeli startups, from seed to growth, is strong. The Israeli cyber ecosystem shows resilience seen nowhere else and continues to stand as one of the most attractive markets worldwide for cyber.
Dorin Baniel is a Principal & Head of EMEA at NightDragon Fund.
