"US administration offers huge opportunities in cybersecurity"

Shay Michel Merlin Ventures TLV manager Photo: Eyal Izhar

Merlin Ventures TLV manager Shay Michel told the Globes Startup Conference that the US administration's tougher cybersecurity stance provides openings for Israeli startups.

US President Joe Biden has put the issue of cybersecurity at the top of his agenda since entering office in January. In May, he even issued a presidential order on the topic of national cybersecurity and instructed the administration and suppliers working with it to improve their handling of the issue. This month, the US administration also fixed hundreds of vulnerabilities due to concern about being exposed to a cyberattack event.

According to Merlin Ventures TLV manager and general partner Shay Michel, who spoke with Ofir Dor at the Globes Most Promising Startups of 2021 Conference, the attitude of the US administration began to change after the outbreak of the Covid pandemic nearly two years ago, when employees began working from home, and this created very high awareness in this field. "The administration understood that even if it was very well protected, third party suppliers were not protected, and it began to toughen up its position on the issue of cybersecurity. We saw attacks that found weaknesses in code and made damaging penetrations that caused harm to very many organizations. You must understand that when a government organization is attacked, it takes years to repair the damage because the scale of the attack is unknown, and how many suppliers are exposed to it."

What is the significance of the change in the US administration for the cybersecurity industry?

"For Israel's industry this is a huge opportunity, because the US administration understands that it cannot only use its own infrastructure and must examine how such a large organization, the biggest organization in the US, can work with suppliers. When you talk with veteran entrepreneurs about work in this area, you hear that the administration is now keen to work with Israeli startups and wants to change. The startup Axonius, for example, began doing this at an early stage, and I saw that the CEO was very satisfied because it involved big customers who pay good money. However, as of today, most startups are beginning at a later stage to try and work with the administration. You have to work smartly and already begin working with them when the company is in its early stage."

What are the US authorities seeking in cybersecurity?

"There is a major discussion in the world about whether to work with portfolio companies that provide all sorts of products in one package, and there are companies like Palo Alto Networks and Check Point that are amazing but were not born to work together with other companies, or work with organizations that know how to work with each other. There are those like Wiz and Orca that from the outset were built as platforms for work with other cybersecurity companies. I think that Palo Alto Networks and Check Point, which still control the market and are investing a great deal in developing for the future, will also go in this direction. We shalll see in the coming year or two."

Merlin is a global investment fund in cybersecurity and you have announced a designated fund for Israel that will invest $50 million in Israeli cybersecurity. That's small money in this industry, so what are you in fact looking for?

"There is no need for another fund that will invest in Israeli cybersecurity, and we will yet see a flood of money pouring into the country. There are many good funds in Israel that are great in cybersecurity and are doing amazing work. Merlin chose to enter the Israeli market because of the opportunities that there are in the US market. Now that Israel has moved on to become 'Scale-Up Nation,' companies need proper infrastructures from the start. Not only to know how to sell, but also how to connect up with large organizations from the outset. In March 2022, we will see that large enterprises working with the administration will find it more difficult to work with small startups, and we want to strengthen those startups from the first day so that from the day that they're ready to emerge, they won't need to fill in 500 pages of applications.

"In general, we are cybersecurity people who invest in cybersecurity. On the global level, Merlin's managing partner has brought to the company one of the world's finest cybersecurity investors to manage all the operations in the US. In addition, we have a very big advantage in Israel as local professionals who work with the Israeli market."

Full disclosure: The event was held in cooperation with J.P.Morgan, Microsoft Israel, and Merlin Ventures TLV

Published by Globes, Israel business news - en.globes.co.il - on December 7, 2021.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2021.

Shay Michel Merlin Ventures TLV manager Photo: Eyal Izhar
Shay Michel Merlin Ventures TLV manager Photo: Eyal Izhar
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