Two years ago, at age 36, Matan Derman, a promising young officer in the IDF 8200 signals intelligence unit, was released from the army with the rank of lieutenant colonel. Derman served in the Intelligence Corps for eighteen years, at the end of which he commanded one of the most prestigious sections responsible for undercover operations about which it’s best to be silent.
Many of those whom he commanded or who served alongside him were discharged long ago, founded companies, and became multi-millionaires. From the tent in the Givati Brigade from which he trained as a recruit to the army’s prestigious Talpiot program, there emerged founders and senior managers of companies worth billions, such as Axonius, Pagaya, and Cato Networks. From the section he commanded came Assaf Rappaport and Yinon Costica, who were among the founders of Wiz, and who featured on the Forbes billionaires list last month; Ohad Bobrov, co-founder of Talon Cyber Security, which was sold for $500 million; and Dan Amiga, co-founder of Island, which received a $3 billion valuation last week.
Nevertheless, Derman (as he is known to all his friends, rather than by his first name Matan) preferred to continue with his military career, for which he received the Israel Defense Prize in 2022. "Over the years, offers and opportunities came along to join companies," he told "Globes", but first-hand contact with the technological core and the direct connection between that and achievements for the country’s security outweighed any financial consideration, he says. Derman knew that at some point the right opportunity would turn up, but he didn’t know exactly when that would be.
Even when he was released from the army, he didn’t rush to found a startup and raise millions as his comrades had done, but chose to continue his studies instead. He applied to do an MBA at Harvard, MIT, and Stanford, and was accepted by all three, but decided to go to Stanford because of its entrepreneurship track, on which students are encouraged to found companies. From this sprang giants like Google and Airbnb. And then it happened: Derman teamed up with one of his former soldiers, Tomer Avni, who had been head of a research section at 8200, and who was also studying at a prestigious US university, namely Harvard.
The pair had kept in touch since their army days, and saw from close range the artificial intelligence revolution take shape. A few months after Derman was discharged, OpenAI unveiled its smart chat engine ChatGPT, and his studies at Stanford brought him in close contact with the decision makers at the giant companies who decided that, for now, generative AI was a great gimmick, but a long way from the core of the enterprise.
Derman never imagined that within a few months he would be at the head of a startup company, Apex, that secures the use of ChatGPT, and should reduce the opposition of executives to its use. He also didn’t think that this year he would raise $7 million from big names like Sequoia Capital and Index Ventures, and from Clément Delangue, co-founder and CEO of CEO of Hugging Face and of course OpenAI founder and CEO Sam Altman, both the latter as private investors. As far as is known, this is the only AI cybersecurity company in which Altman is invested. He continues his private career as an angel investor while running OpenAi, and apparently with no connection to the company.
Since 2010. Altman is estimated to have invested in over 400 companies, about 300 of them personally and more than 100 through startup accelerator Y Combinator, which he ran, and Apollo, run by his brother Max Altman. As far as is known, Sam Altman has never before invested directly in an Israeli startup managed from Israel.
Different backgrounds
Apex founders Derman (38) and Avni (30) come from very different places. Derman, who is CEO of the company, grew up in Re’ut. In his youth he was Israeli national champion in long-distance swimming in his age group, but an injury on the basketball court cut his sporting career short, and led him to join extra-curricular science groups, from which the way was short to the Talpiot program.
Avni, who is CPO, was born into a religious-nationalist family in Shoham. He studied at the Kiryat Herzog yeshiva high school in Bnei Brak, moved with his family to the US during his high-school years, and on his return to Israel studied mathematics at Bar Ilan University before being drafted into the IDF Military Intelligence Research Division. During his IDF service he lost religion, and after his discharge he worked for a time as an investment manager at venture capital firm Blumberg Capital, where he managed investments in cybersecurity companies such as Hunters and Medigate. As mentioned, he teamed up with Derman on the company during his studies for a second degree at Harvard, and it was clear to the two of them that the company they would form would be in cybersecurity.
"At the end of 2022, ChatGPT comes out, and everyone is talking about generative AI, and it pretty much explodes," says Derman. "There was a sense that we were in the verge of a new age in which giant companies could arise, as happened at the beginning of the Internet and of cloud computing. On the other hand, we saw at close hand how US companies blocked the use of ChatGPT and code completion tool GitHub Copilot. They feared that sensitive information would leak out, and that incorrect information would infiltrate critical decision making. Engineers could use information incorrectly, producing hallucinations, that is, errors in AI output, or they could use biased models. There is therefore a basic recoil from using AI models."
Hacking the chatbot
The problem is not just the fear of information leaking to OpenAI servers or the use of models that breach intellectual property rights. Hackers have already learned how to exploit AI models for their purposes by means of what is known as "jailbreaking", that is, persuading the chatbot that the user is the company CFO and causing it to disclose sensitive information from the company’s servers. Others feed the model during training with malicious information or links to malicious sites.
Apex’s solution is in use at several companies among the 200 largest in the US, and Apex expects to record an annual revenue rate of $250,000 in the second quarter. The company was founded just ten months ago. Its founders intend to make it a cyber giant in AI. It draws inspiration from Wiz, which grew thanks to a system that facilitates rapid connection of applications to the cloud, while being indifferent to the type of application, and capable of accommodating any kind of connection. Apex can deal with most of the closed models: Anthropic’s Claude; Google’s Gemini; and most of OpenAi’s models. The company promises that it will shortly be able to work with any open model, such as those of Meta and Mistral, and to manage processes of compliance with regulations and company policies for any connected model and any use made of it. It believes that it will eventually be able to deal with the problem of hallucinations and to neutralize erroneous and biased information.
The pair came to Altman after receiving commitments from Sequoia Capital and Index Ventures, two of the biggest investors in Wiz. "We sought a connection with him, and got it," says Derman. "We saw the AI market becoming hot, and we wanted the best coaches on our bench. When we met him, there was beginning to be talk on the market of responsibility in AI and safety, and the major AI companies need large cybersecurity companies to secure usage.:
Altman does not sit on Apex’s board of directors, but serves as an angel investor whom Derman amd Avni consult from time to time. "When we meet a customer and tell him that we’re supported by Sequoia and Altman, it’s a different conversation," says Derman.
Apex may be a pioneer in its field and connected to high-quality investors, but it’s not alone. Just yesterday, another Israeli cybersecurity company specializing in protecting AI models, DeepKeep, announced that it had raised $10 million from Canadian-Israeli venture capital firm Awz Ventures. Meanwhile, cloud providers such as Microsoft and Amazon are trying to develop alternative solutions, and cybersecurity companies such as CrowdStrike and Palo Alto Networks have entered the field. Derman, however, is convinced that the innovation will come from startup companies entirely dedicated to it. "The AI companies are preoccupied with computing and processing power, and this is not their main concern," he says.
Published by Globes, Israel business news - en.globes.co.il - on May 2, 2024.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.