Israel’s Cyberstarts closes $480m fund for cybersecurity investments

Cyberstarts, a venture capital fund that invests in early-stage cybersecurity startups, raised $480 million to make follow-on investments.

The additional funding comes after Cyberstarts last year raised $200 million for its Opportunity fund, the organization’s third in five years. While the firm is still focused on seed and early-stage funding for promising startups, the Opportunity Fund will seek to back follow-on investments for portfolio companies that are raising Series A and Series B rounds.

The VC firm, backed by Sequoia Capital, was founded in 2018 by Gili Raanan, with an initial fund, Cyberstarts I, of $54 million. In 2020, Cyberstarts launched its second fund, Cyberstarts II, with $100 million to back cybersecurity startups in seed and Series A rounds.

“Most of the entrepreneurs we have partnered with manage to hit the ground and grow into significant businesses over a short period of time,” said Raanan. “The Opportunity fund is another assurance for them and a new generation of entrepreneurs that we can and will support them with a constant flow of cash as they grow their businesses.”

Cyberstarts most recently participated in a $40 million Series B funding round announced by Israeli-founded cybersecurity startup Legit Security on Wednesday.

Among its portfolio companies 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 last year raised over $500 million at a valuation of $8 billion; and Axis Cybersecurity, which built a cloud security platform and was sold to Hewlett Packard Enterprise (HPE) earlier this year.

The funds’ additional investments also include cloud security unicorn Wiz, recently valued at $6 billion, and API security company Noname Security. In total, Cyberstarts’ portfolio companies have a combined valuation of more than $30 billion.

Investors in both of the Cyberstarts funds include cybersecurity entrepreneurs Shlomo Kramer and Marius Nacht, founders of Israeli cybersecurity firm Check Point Software Technologies Ltd.; Mickey Boodai and Rakesh Loonkar, founders of Trusteer and Transmit Security; Nir Zuk, founder of cybersecurity firm Palo Alto Networks; Assaf Rappaport, founder of Wiz and Adallom (sold to Microsoft); and Roy Zisapel of Radware.

The fund recruits the services of chief information security officers at US companies including Starbucks, Home Depot, Walmart and Zoom to provide its portfolio companies with advice and insights regarding the development of their technologies.

Raanan, a veteran in Israel’s tech scene, started out in the Israel Defense Forces 8200 intelligence unit, where he served for some ten 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. Raanan is also one of the inventors behind the CAPTCHA security algorithm.