Shopping for security: Israel's startups are catching the
eye of tech heavyweights
By David Shamah for Tel Aviv Tech
Thanks to the growth in mobile and cloud computing, and the
more porous borders it brings to the enterprise, the security
industry is growing, and Israel's is no exception.
IBM's
recent purchase of Israeli security company Trusteer is just one
example of the new popularity of security in the startup nation. Earlier in
August, GE
announced it was investing in Israel's Thetaray, the company's first
security investment here. And in May, Cisco CEO John Chambers announced that
the company
is starting its own incubator in Israel, specifically to help security
startups come to market.
Elsewhere, digital vault Cyber-Ark announced this week that
it was increasing its staff by 50 percent, due to a rise in new business
(nearly half the companies on the Fortune 50 list are among Cyber-Ark's 1,400
or so clients, including 17 of the 20 largest banks worldwide). The company's
sales, according to its Israeli centre manager Chen Bitan, have risen 40
percent annually year on year for the past several years, and today the company
is the largest private IT security company in Israel.
But the road from security startup to acquisition or
investment by an IBM or a GE is a long one.
Why would multinationals think to go shopping in Israel
altogether? Because, said Gadi Tirosh, a general partner at VC firm Jerusalem
Venture Partners (JVP), multinationals already know Israel and are comfortable
here. Many of them already have R&D facilities in Israel, and in a sort of
virtuous cycle, they meet entrepreneurs and innovators who work in or with
startups.
Security to deal with the new class of security
attacks — advanced persistent threats (APT) or highly-destructive zero day
attacks is very much on the mind of enterprise and tech companies, Tirosh said,
making security startups attractive targets. And very often, companies use
their new acquisitions or investments to open up new R&D labs in Israel,
dedicated to working on security.
"Once a company has a beachhead in Israel it is much
easier for them to search among startups for the technologies they need,"
Tirosh said. One example of this trend was the 2011 acquisition of Israeli
security firm Navajo Systems by Salesforce.com. Navajo's encryption platform
for SaaS was just what Salesforce needed, and in order to continue to draw on
Israeli security technology, Salesforce turned the Navajo offices into its
first Israeli R&D center (Navajo, Cyber-Ark, and ThetaRay are or were part
of JVP's portfolio).
And there's NDS, the largest security firm in Israel,
acquired by Cisco. "Although most people don't think of it as such, NDS,
which develops systems to ensure that cable and satellite TV premium broadcasts
can only be viewed by paying customers, it is, operating at the junction of
security and digital media," Tirosh said.
Acquiring NDS opened up a new vista for Cisco — laying
the foundations for the decision to open an incubator specifically geared
towards security. The field is so hot, in fact, that JVP itself is opening its
own security incubator, Tirosh said.
IBM, too, is jumping on the bandwagon, and will use its
recent acquisition of security firm Trusteer — for which IBM is rumoured
to have paid in the neighbourhood of $1bn, possibly even besting the
Waze-Google deal — to open up its own IT security R&D centre.
IBM already has numerous labs in Israel, and the new one
will consist of, to begin with, more than 200 Trusteer and IBM researchers and
developers to focus on mobile and application security, advanced threat,
malware, counterfraud, and financial crimes. And there are dozens of potential
Trusteers out there, ripe for exits. Expect more big deals in the Israeli
security space, Tirosh said.