In some areas a range of Israeli cybersecurity startups is founded, all competing in exactly same field. This has happened repeatedly in recent years in hot areas, such as automated cyber testing and failure detection in cloud infrastructure. One company starts, followed by more and more.
The field of Data Security Posture Management (DSPM) is an extreme example of this. Over the past two years, seven DSPM Israeli startups have been founded, raising a combined $220 million. The financing has come from some of the best investors in the market including Israeli venture capital funds specializing in cybersecurity to the best known international venture capital funds.
The best known Israeli entrepreneur engaged in cloud data protection is Asaf Kochan, the commander of the IDF's 8200 intelligence unit until last year and today cofounder and president of Sentra, which was founded in July 2021, and has since raise $23 million. However, other startups in this field also have notable founders, including graduates of the 8200 and Talpiot units, defense prize winners and serial entrepreneurs who have already achieved exits.
Organizations have shadow information
The first thing that DSPM software does is to connect to the cloud account of the customer and identify where they locate their data. Then the software sorts the data according to categories and marks where the critical data for the organization is located, such as personal and financial information of customers or commercial secrets. In order to do this, the software is required to learn to distinguish between ID numbers and other sequences of digits and between a document with a medical diagnosis and an organizational procurement document. Finally the DSPM software warns about risks regarding critical data, such as places where it is not protected or encrypted as required or is open to immediate broad access both inside and outside the organization.
DSPM turns processes that are currently undertaken manually in organizations into automatic ones - first of all identifying where significant information is stored in the cloud. "To this day, organizations go one by one through the managers of the various systems and question them about what information they keep in the cloud and exactly where. The result is an inventory list that is saved in Excel, and is never accurate and sufficiently up-to-date," explains Cyera CEO Yotam Segev, which has raised $61 million dollar since it was funded in December 2020.
According to Rona Segev, a partner at venture capital fund TLV Partners, which has invested in cloud data protection startup Laminar, manual solutions are no longer adequate today. Laminar was founded in August 2020 and has raised $67 million to date.
She says, "Many changes have taken place in the world of data. The amounts of data that organizations keep have grown like crazy, and organizations use much more data than before for different applications. New architectures have also decentralized the data so that it is no longer concentrated in one place but in many databases, which creates problems. The result of all this is the creation of 'shadow data', data that the organization neither knows where it is or to where it is flowing.
The increasing regulation worldwide on privacy issues and data protection requires organizations, especially in the medical and financial sectors, to take an entire series of precautions to prevent leaks. Multinational companies, for example, are obliged to keep personal data about EU citizens in member countries and not on servers in the US. But in order to do this, you first need to know where all the data is.
Support from Gartner
Organizations generally take care of the perimeter protection of their cloud operations by identifying possible vulnerabilities resulting from exposed servers, weak passwords and outdated versions of software. The DSPM adds another layer of protection, beyond the perimeter.
"The assumption inherent in our product is that every customer will eventually succeed in being hacked, so you need to define what the critical assets are, map down to the file level where the important information is located - and protect it," says Kochan. "Actually, in the customers' cloud environment, where most of their critical data is today, chaos prevails, and it is impossible to really know where the data is encrypted and where it is forgotten and thrown away, where it is protected and where it has been hacked."
The early stage Israeli startups are not the only companies operating in this crowded and competitive field of data protection in the cloud. US companies developing DSPM solutions include Open Raven, which has raised $39 million and Symmetry Systems, which has raised $18 million.
There are also veteran startups that have moved into the sector like Israeli-US unicorn BigID, which has raised $250 million. BigID, which helps organizations meet regulatory privacy requirements, recently launched its own DSPM product. Last week, Wiz, an Israeli unicorn led by CEO and cofounder Assaf Rappaport's, which achieved a valuation of $6 billion at its most recent financing round, also announced the launch of a DSPM product. Wiz is integrating its DSPM with its cloud perimeter protection product and banking on customers preferring to buy several solutions from one provider, instead of having to work with another startup.
Despite the anticipated growth in the data protection in the cloud sector, it is clear that it will not be able to accommodate all the players who have entered it. As has happened in other branches of cybersecurity, the number of players will likely be significantly reduced. "The field will coalesce around two dominant companies, with the other companies disappearing or being acquired," Kochan believes. "The victors will have the strongest founding team, who will be able to attract the most talent and provide an automated, easy-to-install product that provides targeted and actionable insights, and integration with other security products."
"I believe that ultimately between one and three players will remain," says Flow Security founder and CEO Jonathan Roizin, which has raised $10 million to date. "The victors won't necessarily be those who raised most money but rather whoever provides the most suitable product for the market and whoever moves quickest to reach the relevant customers."
Published by Globes, Israel business news - en.globes.co.il - on December 1, 2022.
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