2025 VC Survey"The Israeli cybersecurity industry demonstrated exceptional resilience," says YL Ventures
2025 VC Survey
"The Israeli cybersecurity industry demonstrated exceptional resilience," says YL Ventures
Ofer Schreiber joined CTech for its 2025 VC Survey to share reflections on the tech ecosystem and predict where Startup Nation will go in the next year.
“Despite significant challenges, 2024 was a remarkable year for the Israeli high-tech industry, particularly its cybersecurity sector,” said Ofer Schreiber, Senior Partner and Head of Israel Office at YL Ventures. “In the shadow of October 7th, 2023, and under wartime conditions, with many tech employees being called up for military reserve duty and the economy facing various disruptions, the Israeli cybersecurity industry demonstrated exceptional resilience.”
Schreiber joined CTech for its annual VC Survey, where prominent investors are asked about their predictions and insights for the year ahead, as well as reflections on the past 12 months.
“Rather than faltering, the industry not only maintained its productivity and customer-facing efficiency, but thrived,” he added. “The Israeli cybersecurity industry has traditionally been categorized by relatively quick exits, but founders are now focusing on building more sustainable, long-term companies.”
You can read more in the interview below.
Fund ID
Name of fund/funds: YL Ventures
Total sum of the fund: $800M
Partners: Yoav Leitersdorf - Managing Partner, Ofer Schrieber - Senior Partner and Head of Israel Office; Sharon Seemann - Partner (Marketing); Justin Somaini - Partner; Andy Ellis - Partner
Notable/select portfolio companies (active): MIND, Aim Security, Gutsy, Miggo Security, Opus Security, Valence, Grip Security, Piiano, Orca Security, Satori, Cycode, Hunters, Vulcan
Notable exits: Out of 31 investments since the fund's inception, 14 companies were acquired by leading global companies, including Twistlock - acquired by Palo Alto Networks; Medigate - acquired by Claroty; Spera Security - acquired by Okta; Hexadite - acquired by Microsoft; Build Security - acquired by Elastic; Firelayers - acquired by Proofpoint; Enso Security - acquired by Snyk; Eureka Security - acquired by Tenable
2024 is over. How can you summarize it in terms of the Israeli high-tech industry?
Despite significant challenges, 2024 was a remarkable year for the Israeli high-tech industry, particularly its cybersecurity sector. In the shadow of October 7th, 2023, and under wartime conditions, with many tech employees being called up for military reserve duty and the economy facing various disruptions, the Israeli cybersecurity industry demonstrated exceptional resilience. Rather than faltering, the industry not only maintained its productivity and customer-facing efficiency, but thrived. There was a significant uptick in interest from international investors this year, with top-tier global venture capital firms increasing their presence in the country or appointing Israeli-focused partners. The Israeli cybersecurity industry has traditionally been categorized by relatively quick exits, but founders are now focusing on building more sustainable, long-term companies. The sector’s success during this challenging period reinforces Israel's position as a global cybersecurity leader, with its reputation expanding beyond being known for its military intelligence prestige to showing proven business success and category leadership.
Looking ahead to 2025 - What challenges and opportunities await the Israeli high-tech sector in the coming year, and how are you, as investors, preparing for them?
The geopolitical situation in our neighborhood is always dynamic and will most probably continue to challenge the economy in 2025, but our industry’s proven resilience will withstand these headwinds. I foresee growing market saturation in established cybersecurity categories that will make it more challenging for new startups to differentiate themselves, but will also propel others to future category leadership. That being said, this saturation comes at a time when the Israeli cybersecurity ecosystem is maturing. This will likely create new spaces for innovation, particularly in transforming traditional security domains like DLP, IAM, and cloud security. For investors, 2025 promises to be another year of opportunities in the Israeli cybersecurity sector, with greater emphasis on supporting portfolio companies towards sustainable, long-term growth strategies and combining local investor expertise with global VC resources.
How will new American leadership affect the global high-tech industry or economy? And where does this place Israel and its entrepreneurs?
Market dynamics, technological innovation, and global economic shifts tend to have more impact than political changes on the high-tech industry, and the same goes for our local cybersecurity ecosystem. Our industry has demonstrated remarkable resilience and adaptability through wars, market downturns and political upheavals - with only short-term effects on its activity. The Israeli cybersecurity sector is built on strong foundations of technological talent, R&D capabilities and strong, proven business execution, so we expect our entrepreneurs to continue focusing on developing innovative security solutions that address universal market needs, regardless of global political leadership.
What are the most important things the Israeli government should do today to accelerate the high-tech engine in the coming year?
Key priorities for supporting continued growth in the cybersecurity ecosystem on a national level should include:
- Supporting and nurturing talent development through education programs, mentorship initiatives and creating more opportunities for diverse populations to enter the cybersecurity field;
- Facilitating stronger connections between the local cybersecurity ecosystem and global markets, while encouraging cross-border innovation partnerships;
- As a leader in innovation and entrepreneurship, Israel should be a considerably more attractive place for multi-national corporations to invest in, whether through acquisitions, R&D, opening up excellence centers and other endeavors.
- National investment in AI should be a top priority, to lay the groundwork and foundations for future innovation in cybersecurity and other deep tech fields. Israel is a wellspring of technological talent and this should be encouraged and developed with programs, academic collaboration, budgets, etc.
Are there new sectors you see as relevant? Are there any fields you anticipate will weaken significantly in the coming year?
While the Security for AI sector appears to be saturating, with an expected decrease in new startups as existing players compete for category dominance, several new sectors are emerging as particularly promising: AI-enhanced security solutions that transform traditional security domains, specialized cloud security solutions that go beyond what incumbent cloud security leaders provide and Non-human Identity solutions addressing the exponential growth of machine identities. There are several factors that we anticipate will make it increasingly difficult for younger startups, solving real but niche pain points, to grow independently in the long run. The competitive and crowded nature of the industry, customer desire to simplify security stacks and the expansion of incumbent vendors and mature startups will present challenges for these entrepreneurs in the coming year.
Is Israel missing out on the AI revolution in the global arms race? If not, what should the local industry focus on to join the global race?
Israel isn’t investing as much as it should in AI by global standards. One of the main reasons for Israel’s global leadership in cybersecurity, for example, is the unparalleled investment made by the Israeli government and its defense sector in this industry. If we want to generate a similar dominance in AI, we should employ a similar strategy. Unlike cybersecurity, however, developments in AI are driven by academia and research. Israel should therefore double down on its AI R&D efforts on a national scale. That being said, Israel isn’t entirely missing out on the AI revolution. It is approaching it strategically, leveraging its renowned cybersecurity expertise to pave a new way for AI to transform business. From securing and enabling widespread AI use in enterprises to enhancing traditional security domains, Israel is carving out a specialized position for itself in security for AI and AI-enhanced security solutions. These and other next-generation AI innovations will continue fueling the Israeli ecosystem in 2025.
Could the global IPO drought end in the coming year?
The cybersecurity sector is - as always - the best positioned to lead this revival due to the constant demand for innovative security solutions regardless of market conditions. We know of several strong security companies preparing for public offerings, but we estimate that most Israeli cybersecurity IPO candidates will wait until 2026.
From an investor's perspective: will the coming year be better for early-stage startups or more mature companies?
I foresee distinct opportunities for both ends of the funding spectrum in 2025. For early-stage startups, seed funding is at a healthy level and with growing global VC interest, there is strong support for innovation in cybersecurity. More mature, seasoned entrepreneurs are mentoring first-time founders on how to set and scale the building blocks of a successful startup, and if they succeed in getting market traction 2025 will see new potential category leaders in several spaces. These early-stage startups will have to face higher bars for securing follow-on funding and will need to demonstrate strong execution from day one, however. As for mature cybersecurity startups, 2024 was a phenomenal year. The market favors longevity and sustainability, as do investors, and this shift in interest from quick exits to category domination will prove beneficial for more mature cybersecurity startups. =
Did you raise fund money in 2024 for an existing fund or a new one? What are your expectations regarding this matter for 2025?
We are currently investing out of our $400M fifth fund, raised in 2022, the majority of which is available for investments in new startups and for follow-on investments in our existing portfolio companies. We have an extremely disciplined investment strategy, according to which we invest in only a handful of extraordinary startups throughout the fund’s lifecycle. This strategy ensures the long-term viability and sustainability of our portfolio companies, regardless of market fluctuations, in good and more challenging economic environments.
How many investments did you make in 2024, and how does it compare to previous years?
Based on the global investment landscape's current cautious climate and our firm’s investment strategy, we continuously maintain our selective investment approach. In 2024 we invested in two cybersecurity startups that are still in stealth and will launch in mid-2025. As a firm, we focus exclusively on investing in teams that demonstrate both technical excellence and business acumen, prioritizing those with compelling potential for long-term success and sustainable growth.
Provide an example of an intriguing investment you made in 2024. What sets this company apart, or what is distinctive about its sector?
While specifics regarding our 2024 investments remain confidential at this stage, we invested in a team that is developing a very innovative approach within the cloud security market. While the sector may seem saturated and competitive, a unique approach driven by founders with unparalleled domain expertise and experience sets this startup apart from all the other vendors in this space, which we believe they’ll easily prove once out of stealth this year.
Two notable companies that you think will thrive in 2025.
Company Name: MIND
Sector + description of the product/service: MIND is on a mission to help organizations thrive in a digital world by protecting their most sensitive information. MIND is the first-ever data security platform that puts data loss prevention (DLP) and insider risk management (IRM) programs on autopilot to automatically protect sensitive information, mitigate risk and preserve brand reputation.
Investment amount + total: MIND raised $11 million in seed round funding led by YL Ventures
Founding Year: 2023
Reasoning why this is their year: As data breaches and insider threats continue to grow more sophisticated, companies are desperately seeking automated solutions for DLP and IRM. Existing DLP tools have become increasingly obsolete because they were built for a pre-cloud, pre-AI era with static rules and high false positive rates. MIND's automated, AI-driven approach directly addresses these limitations by understanding context, user behavior, and business processes to provide intelligent protection that adapts in real-time. This positions them perfectly for 2025 when organizations will be actively looking to replace their legacy DLP solutions.
Company Name: Miggo Security
Sector + description of the product/service: Miggo is the first Application Detection and Response (ADR) platform on a mission to stop application breaches. 80% of all cyber incidents happen in the application layer, however too many are being slipped by existing tools due to a blindspot to the actual application behavior. By using in-application runtime context, Miggo maps how applications actually operate in runtime, identifies high-risk application flows, pinpoints the weak spots, and provides real-time detection and response capabilities in the application layer.
Investment amount + total: Miggo raised a $7.5M seed round led by YL Ventures.
Founding Year: 2023
Reasoning why this is their year: Miggo has a fundamental advantage over traditional security tools (EDR, WAF, CNAPP) due to the platform’s unique visibility into runtime application behavior - a capability that becomes more crucial as applications grow more distributed. With early validation from seasoned security leaders, 2025 is set to be the year when broader industry adoption of Application Detection and Response (ADR) takes hold, as organizations recognize that legacy approaches can't address the blind spots exposed by recent breaches.
