Information security saves lives!/Aman Training Branch.
Local cyber is boiling over, and it seems that the innovation of the field remains the only one that continues to capture the imagination of investors enough to keep opening their wallets.
This week, for example, the Israeli cyber company Cyera announced that it had completed a fundraising of approximately $300 million based on a company value of approximately $1.4 billion, and reported "great demand" for participation in the fundraising.
It is said in the industry that the war of iron swords accelerated the merger and acquisition processes in the industry, which began as early as 2023. The exit report of the consulting and accounting firm PWC Israel for the year 2023, for example, showed that local cyber attracted approximately 51% of the financial scope of all purchase and issuance transactions in Israeli high-tech that year.
According to the report, approximately $3.8 billion was invested in 19 transactions in the field of Israeli cyber out of approximately 7.5 billion shekels invested in 45 transactions in the fields of Israeli technology and innovation that year (until December 3, 2023).
The report also stated that 10 of the 12 transactions that were made with a value of 200 million dollars or more were from the cyber world, and excluding the issuance of the beauty-tech company Oddity, which is also the parent company of Ill Makeup, and the Freightos company that develops automation systems for shipping goods and cargo, the cyber companies constituted 100% of all these transactions.
It is said in the field that Israel's security reputation was not damaged following a war of swords and iron, and even strengthened. Its combination with the reputation of local innovation has made Israeli cyber the focus of the international market, which is estimated at 185 billion dollars, and is expected to stand at about 290 billion dollar until the year 2027. This is according to a review by the Oppenheimer investment house from last March.
Chen Goldberg, CEO of the cyber company CloudWize.io feels the demand firsthand: "The local cyber industry did indeed experience a slowdown with the start of the war of iron swords in some of the sector's target markets, which was mainly due to the economic and business uncertainty created by the war.
"But along with it, large demands began from new markets such as India, Brazil, Mexico, and continued demands also from the USA, for the innovation of Israeli products in the field. The main cyber that continues to develop today mainly concerns the fields of artificial intelligence, which helps defense on a larger scale, in light of the multitude of cyber attacks experienced in the world in general, and in Israel in particular.
"It should be noted that most of the known cyber transactions were made in Israel this year by large companies that are Israeli themselves, and this is a trend that started as early as 2023 and accelerated following the war, in light of the same trend of increasing the pace and amount of attacks."
In the bubble, the field did not remain only among the local startups and also spread to the Israeli cyber companies traded on Wall Street in the USA. The shares of the three Israeli cyber giants, for example, jumped on average about 28% since October 7, and about 6.22% since the beginning of the year.
Excluding the fall suffered by the Palo Alto stock, this is an average increase of about 11.7% since the beginning of the year, compared to the Nasdaq and S&P500 indices, for example, which rose by about 8.27% and 9.22% for the same period, respectively. Since October 7, these indices have increased by 20.54% and 20.16%, respectively.
The share of Cyberark showed the highest rate of increase among the three Israeli cyber giants tested by Walla! Silver, which stood at about 50.7% since October 7, and at about 15.6% since the beginning of the year.
Itay Kidron, the chief cyber analyst at the Oppenheimer Investment House, detailed in his review from last March that "Cyberark provides solutions in the field of identity security valued at approximately 50 billion dollars, and in recent years has made a transition to the SaaS cloud model in all of its products, and now generates 67% of the revenues and 75% of the -ARR (an index that calculates the total revenue that a company can expect to generate from its returning customers on an annual basis) from cloud subscriptions, which is an activity that grows at a particularly high rate of 70%.
"Following the transition to the SaaS model, Cyberark's activity is on an accelerated growth trend, along with an improvement in profitability, A trend that is expected to continue in the coming years."
In contrast, the largest Israeli cyber company of all, which is also one of the giants of international cyber companies, has experienced a decline since the beginning of the year, after announcing an "aggressive marketing strategy that will include offering discounts to its customers," as Kidron writes.
The latter sees In the same decline, "an excessive market reaction that does not take into account Palo Alto's ability to increase its market share while maintaining a high operating leverage." and points out that, like Cyberark, its growth leverage is also found in the transition to the cloud, alongside high profitability and "cash flow with an FCF rate (cash flow free) of about 40%".
The forecast for the coming year is a continuation of the bubble in the local cyber sector, and with it news about acquisitions, mergers and additional recruitments. At this time, it seems that this is the only field in Israeli high-tech that manages to maintain the level of valuations with which they entered the year 2023, and especially when the war of iron swords began in the end.