Israel’s Cybersecurity Startups Shattered Records in 2020 Despite Pandemic
While 2020 will be remembered for its unprecedented global challenges, Israel’s cybersecurity sector emerged stronger than ever, setting new benchmarks for investment and innovation. As remote work exposed critical security gaps worldwide, the “cyber nation” experienced remarkable growth, proving its resilience and strategic importance.
A Year of Unprecedented Growth
Key 2020 highlights for Israel’s cybersecurity ecosystem:
- $2.75 billion total investment (97% increase from 2019)
- 64 seeded companies (58% of newly founded cybersecurity firms)
- 4 new unicorns added to Israel’s cybersecurity roster
- 11% increase in average seed round size ($5.2 million per deal)
Image Credits: YL Ventures
Seed Funding Trends Reveal Market Maturity
Israel’s cybersecurity startup landscape showed remarkable resilience in 2020:
- 5% increase in newly founded companies (reversing 2019’s downward trend)
- 36% of new companies founded by experienced entrepreneurs
- 23% of seed rounds included cybersecurity angels
“Today’s founders are building ‘super teams’ with deeper commercial understanding,” noted Dan Amiga, CTO of Zero Abstraction and angel investor. “The focus has shifted from military cyber techniques to enterprise, cloud, and digitalization solutions.”
Where Investors Placed Their Bets
2020’s investment patterns revealed clear sector preferences:
Application Security
- 140% increase in seed investments
- Examples: Enso Security, build.security, CloudEssence
Cloud Security
- 200% surge in seed funding
- Examples: Solvo, DoControl
Data Protection & Privacy
- 50% year-over-year growth
- 8.3% of total ecosystem investments
“The accelerated cloud adoption created unprecedented security challenges,” explained Avi Shua, Orca Security CEO. “This democratized the market for innovative SaaS solutions.”
Notable Funding Rounds and Exits
2020’s standout performances included:
New Unicorns
- SentinelOne
- Snyk
- Cato Networks
- BigID
Major Funding Rounds
- SentinelOne: \(200M (Series E) + \)267M (Series F)
- Snyk: \(150M (Series C) + \)200M (Series D)
- Orca Security: \(20M (Series A) + \)55M (Series B)
While exit numbers dipped 20%, average exit size soared to $401 million, reflecting founders’ ambitions to build mature companies before acquisition.
Private Equity’s Growing Influence
Private equity firms emerged as major acquirers in 2020, validating the sector’s long-term potential. This trend signals:
- Increased confidence in Israeli cybersecurity innovation
- Willingness to pay premium valuations
- Strong outlook for future M&A activity
Challenges and Opportunities Ahead
Despite the sector’s success, critical gaps remain:
- Only 3.16% of new companies had female founders
- Need for greater diversity in leadership roles
- Untapped potential in IDF’s diversification programs
2021 Outlook: Continued Growth and Consolidation
Industry experts predict:
- Stabilization of new company formations as standards rise
- More billion-dollar valuations as investors gain confidence
- Increased “blue and white” acquisitions by Israeli unicorns
As cyber threats grow more sophisticated, Israel’s ecosystem—with its experienced founders, strong investor support, and technological edge—is uniquely positioned to deliver next-generation solutions.
Cycode, build.security, Enso Security and Orca Security are YL Ventures portfolio companies.
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