It has already become a routine matter. An Israeli cyber security company has an exit, and its founders' CV includes service in the Israel Intelligence Corps Unit 8200. The connection between former members of Unit 8200 and Israeli high tech, especially the cyber security sector, became natural long ago, and the man who may know the most about it is former Unit 8200 commander Brigadier General (reserves) Nadav Zafrir. Zafrir, who resigned from the IDF four years ago, wasted little time; immediately after his demobilization, he founded Team8, a cross between a venture capital fund and an incubator for founding cyber security companies in Israel. Zafrir, now Team8's CEO, will take part in the upcoming Globes Capital Markets Conference on June 13.
"From my point of view, four years after I left the army, and for the sake of poetic justice - the entire IDF, especially its technological units, made a great contribution to Israeli high tech," Zafrir says when we ask him about the connection between Unit 8200 and Israeli high tech, and how he sees it in the future. "What's interesting is that the experiences of young guys in the army during their military service prepare them for a large extent for the world of startups, innovation, and entrepreneurship almost better than any institution of higher learning or any other method. It wasn't planned that way, but in an era in which the pace of change is increasing, and the classic academic institutions, including the conventional educational methods, can't keep up with this pace, the IDF's method, based on a very careful selection and filtering process of compulsory recruitment and the need for personal accomplishment at a very young age, prepares them for quick adaptation, speedy learning, and leadership in civilian life."
Although Unit 8200 has existed in its current format for over three decades, Zafrir argues that even today, when an 18 year-old is recruited to the unit, he does not really know what Unit 8200 is. "It's a very large organization with many sub-units, many sub-topics within each of those sub-units, and various and widely divergent functions. As I said, the filtering process that the recruits go through contributes a lot to them. It's a process that includes socio-metric tests, psychological tests, personal interviews, tests of leadership and cooperation ability, and above all, the IDF is trying to assess their ability to learn new things very, very quickly. After all, the army is getting these recruits for a limited time, so it has to make sure that their learning ability - for languages, software, and intelligence professions, say - will be very quick. The army has no time for a two-year course, because after two years, a person's military service is almost over. In other words, it's a very intensive process that requires very rapid adaptation."
"Globes": In other words, Unit 8200 is a lot more than a platform for inventing winning cyber security technologies.
Zafrir: "That's right. At a very young age, the recruits to the unit are required to deal with very complex problems, and with enormous responsibility on their shoulders, because at a certain stage, they start leading other people. In the army, you can become a commander of a large number of people at a very young age. In civilian companies, you can't achieve this with such minimal experience. So when a guy is released, say at age 23, what he has accumulated in five years of service is not the same as another person his age in Norway or Texas."
Is it possible that more and people in the past decade are trying to get into Unit 8200 in order to make it easier for them to found or join a cyber security startup, in the hope of making an exit?
"Definitely so, and I see no problem with this. People in my generation also regarded becoming an officer or being accepted to pilots' course as a springboard to something better in civilian life. There's nothing wrong with regarding military service as a personal contribution beyond the direct contribution to the country. Still, people leaving Unit 8200 shouldn't be misled into thinking that serving in this unit is a direct path to an exit. Anyone who thinks that is wrong.
"In general, military service, beyond its necessity for the nation's security, and I'm not being cynical, makes a significant contribution to the Israeli economy. It's more obvious in the case of the technological units, but not only in them. Actually, we have succeeded in turning a disadvantage into an advantage, and that's fantastic. In the past, military service was perceived as a waste of time, while it's different now. We didn't plan it that way. No one thought about how to make the IDF into a catalyst for the Israeli economy, but that's what happened."
Zafrir will speak at the Rethink Cyber conference on June 25, which will open the 2017 Israel Cyber Week.
"Superfluous solutions"
Zafrir founded Team8 less than a year after leaving the IDF, and when we ask him to explain what it actually is, a venture capital fund or an incubator, he answers, "Both. There are advantages and disadvantages in each one of these methods. We searched for and found a platform that combines what venture capital funds do with what incubators do, and added other things.
"The statistics of startups are known. Most of them don't succeed, and we at Team8 believe that the percentages of success can be dramatically improved, thereby saving on resources, which are mainly dreams, followed by time, money, and sweat. The first problem of a startup is the rate at which it has to work, in other words, how many resources it has. A startup is a very lean body, especially at the beginning, so it has to solve very, very focused problems, and many times this is done superficially, because it has to give very fast results. Another problem is the breadth of the area it covers. When a startup addresses a problem, it usually looks at it from a very narrow angle.
"A third problem, which is much more relevant to Israeli startups, is the degree of exposure to the world of problems that it is trying to solve. Because its exposure to the market in which it will sell its product is very limited in the initial stage, some of its resources are aimed at the wrong places.
"All this is even more true in the cyber security sphere, because in this world, you don't innovate on the side of innovation; your innovation is on the side of defense in order to prevail over the innovation on the attacking side that is causing damage. The defense solutions currently existing in the market lack the ability to understand the attacking side. In order to compete with something, you have to understand how he thinks. In addition, there is a supply of products and solutions in this world, some of which are superfluous. There are many niche solutions, which makes those who use them become in effect an integrator of many cyber security players. Using a large number of solutions simultaneously is sometimes a bigger problem than the attacker himself."
Zafrir claims that Team8 combines three tools, and applies a different process than that of venture capital funds and/or incubators. "The first tool is the syndicate between us, in which leading companies and concerns like Microsoft, Cisco Systems, and others are members. This outlook helps us overcome the problem of access for understanding the problem requiring a solution."
What does this actually mean? How does the syndicate contribute to creating companies with a greater chance of success?
"We are holding discussions with each of the members in order to understand what the major problems facing them are. In other words, before we found companies, and before we even start thinking about technological ideas, we do deep research involving all the syndicate members in order to understand what pains them in the cyber security sector."
Does that actually means verifying that there is a market for a product before developing it?
"That's one element, but there are others, such as understanding where the attackers are going, and to what extent the problem will become more powerful. Sometimes, it is unclear whether the problems involved will really exist in the future."
As an example, Zafrir cites the two companies founded by Team8 to date, which have raised an aggregate $62 million: "Claroty arose in the understanding that as soon as industrial facilities start being connected to the Internet, a problem will be created, because these facilities usually use vary old technologies, and once they are connected to new technologies, there is a collision, and a problem emerges. Claroty has therefore created a platform capable of speaking all of the various languages simultaneously at a level that can shed light on very complex systems, when the person using them has limited ability to see what there is in the system in particular, and in the facility in general. The second company, Illusive, specializes in misleading attackers trying to carry out cyber attacks. In its case, instead of killing the mosquitos, we dry up the swamp; in other words we attack the attacker's decision-making process, not his malware."
Zafrir says that the second tool, after the syndicate, is the talents. "If anything is very lacking it the cyber security industry, it's very talented and experienced people. In Israel, thanks to Unit 8200, there is a wellspring of talents joining the industry at a very young age. At Team8, we're creating a very attractive place for the best minds, and not just for people from Unit 8200. We have recruited 200 people to date for all of our companies, and we're recruiting more at a rate of eight people a month, in other words, 100 more this year. We'll soon announce two new companies we founded in the Team8 framework."
In addition to the employees of the companies themselves, Team8 has a research group with 20 people. The third tool is more efficient management of resources. "All of Team8's various companies share resources, such as real estate resources, research and development resources, and so forth. Finally, the process by which we work differs from that of an ordinary venture capital fund or an ordinary incubator. In our case, it's not an idea waiting for money, but money waiting for an idea."
In the bottom line, how do your investors judge you? As a venture capital fund?
"We will obviously be judged by the return we give our investors, but at the same time, we will be judged by our ability to found sustainable companies, and by the value they reach."
That's like a venture capital fund.
"Yes, you could say that. I only say that it's not the only value by which we will be measured."
Published by Globes [online], Israel Business News - www.globes-online.com - on June 5, 2017
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