Israeli cyber startups attract interest as cybersecurity attacks surge during Gaza war
Merger and acquisition deals of cyber startups amounted to $985 million so far in 2024; cybersecurity watchdog says there was a 2.5 times increase in cyberattacks during war
Sharon Wrobel is a tech reporter for The Times of Israel.
Despite the ongoing war with the Hamas terror group, Israel’s cybersecurity industry is bucking some of the downward trend in the tech sector amid a surge in hacking attacks and threats from Iran and Hezbollah.
In the first three months of 2024, the volume of mergers and acquisitions in Israel’s cyber sector generated $985 million across eight deals. During the same period, local cyber startups nabbed $620 million in capital from investors, accounting for 38% of the total funding raised by the tech sector, according to a report by Cybertech Global and IVC, released on Sunday ahead of a global cyber conference in Tel Aviv kicking off this week.
That’s after 2023, a year of political uncertainty and the breakout of the war in Gaza, M&A amounts of Israeli cyber deals added up to $7.1 billion – a record high — out of a total of $10 billion in the local tech industry, according to the data presented in the report. However, the number of exits of Israeli cyber firms dropped by 35%, from 37 deals in 2021 to 24 in 2023.
“The trend of increased mergers and acquisitions in Israeli cyber, which began last year, continues into 2024, as global cyber threats grow year by year,” said Cybertech founder Amir Rapaport. “In contrast to other sectors, geopolitical tensions increase interest and investment in cyber companies.”
“Therefore, we expect to see more investments in Israeli cyber companies and new startups that address emerging threats,” Rapaport added.
Fundraising by Israeli tech startups and companies plunged 56% in 2023 year-on-year, as the sector grappled with political uncertainty around the judicial overhaul and the outbreak of the war with Hamas. With Israel six months into the fighting, many local startups are continuing to struggle to attract essential funding, in particular from foreign investors, while major deals will likely not happen.
Meanwhile, in the months before the outbreak of the war and in the months into the fighting, a flurry of Israeli-founded cybersecurity startups were being snapped up by global tech companies as well as local players as they look to meet the fast-growing security needs of businesses and government for cybersecurity solutions.
Since the Hamas-led massacre on October 7, the number of cyberattacks Israel experienced was 2.5 times higher than in previous years, with a total of 3,380 incidents recorded until the end of 2023, according to the National Cyber Directorate’s annual report. During the war period, about 800 of the cyber assaults were categorized as having “significant potential for damage,” according to the report.
Last week, the Justice Ministry said it was looking into a “cyber incident,” after activist hackers protesting against the war in Gaza said they managed to breach the ministry’s servers and retrieve hundreds of gigabytes of data.
As the war unfolded, more and more attacker groups originating from Iran and Hezbollah were identified, according to the directorate. During this period, hospitals became targets of cyber assaults, and more generally included attacks to undermine the war effort and gather intelligence, the annual report said.
Among the most notable local cyber deals at the end of 2023 were Talon Cyber Security, snapped up by California-based cybersecurity firm Palo Alto Networks for $625 million, which also bought Israeli startup Dig Security for $350 million. Earlier this year, US cybersecurity giant Zscaler acquired Israel’s Avalor for $350 million and cyber unicorn Wiz bought Gem Security for $350 million.
Israel’s cybersecurity industry includes 522 startups and firms, out of which 276 are early-stage startups, with 125 in the research and development stages, and 96 are growth-stage firms generating revenues of $10 million or more.
Despite the ongoing war, Israel will this week hold its 10th cybersecurity conference in Tel Aviv that will draw thousands of guests, including delegations from 60 countries, company and government representatives, as well as cybersecurity experts and hackers.
