From the COVID-19 curve to electoral polls, from public temperature controls to stimulus controls, 2020 was dominated by numbers, the guiding compass of any self-respecting venture capital investor.
As a VC focused solely on investments in Israeli cybersecurity, the numbers that guide us have become some of the most interesting to watch over the past year.
The start of a new year is the perfect opportunity to reflect on the annual performance of Israel's cybersecurity ecosystem and prepare for what the next twelve months of innovation will bring. With the global cybersecurity market outperforming this year's expectations in a panic, we carefully analyzed the figures to see how the Israeli market, its top performer, compared and predict what it has in store.
The cybersecurity market continues to generate investor confidence, who seem to recognize its increased importance during times of crisis.
The "cyber nation" has not only remained strong during the pandemic, but has also seen an increase in fundraising, particularly in application and cloud security, following the emergence of gaps in flow security. remote work caused by social detachment. Encouraged by this, investors have shown committed enthusiasm for their own growth and merger and acquisition landscape.
Encouraged by the overall strength of the industry and new opportunities, today's Israeli visionaries are developing stronger convictions to build bigger companies; many of them, already successful entrepreneurs, are placing their bets in the sector as serial entrepreneurs and angel investors.
The numbers also reveal how investors are increasingly focusing their funds on larger seed rounds for serial entrepreneurs and major industry trends. More than $ 2.75 billion has been paid into the industry this year to support businesses at all stages, a 97% increase from last year's $ 1.39 billion. If its long-term slope is any indication, we can only expect it to continue to grow.
However, although they clearly indicate progress, the numbers still make clear the need for demographic recovery. Like the rest of the industry, Israel's cybersecurity ecosystem must adapt to the pace of change set by social movements this year, and the time has long since passed for true diversity and gender representation in cybersecurity leadership.
Seed rounds reveal fascinating changes
As major market leaders have gained experience and expertise, the level of access to Israel's cybersecurity startup ecosystem has gradually increased over the years. However, this does not appear to have an impact on this year's entrepreneurial breakthroughs. 58% of Israel's new cybersecurity companies received seed rounds this year, totaling 64 seed companies in 2020 compared to 61 last year. The total number of newly incorporated companies increased by 5%, reversing last year's downward trend.
The amount invested in seed reached an all-time high as the average deal size in 2020 increased by 11%, equivalent to an average of $ 5.2 million per deal. This continues an upward trend in medium seed cycles, which have been increasing over the past four years due to sizeable year-over-year increases. It also provides additional support for transitioning to higher caliber planting rounds with a focused, all-in strategic approach. In other words, founders who meet the new entry limit are gathering bigger rounds for more ambitious visions.
Where does the money go?
2020 was a bumper year for cloud and application security startups. Perhaps Snyk and Checkmarx's runaway successes left strong impressions. This year saw an explosive 140% increase in initial investments from application security companies (such as Enso Security, build.security and CloudEssence), as well as a whopping 200% increase in initial cloud security investments (such as Solvo and DoControl), compared to last year.
