Cyberstarts raises new $200 million fund for cyber security investments

JERUSALEM, Feb 28 (Reuters) - Venture capital firm Cyberstarts said on Monday it raised $200 million for a new fund to invest in early stage Israeli cyber security companies and planned another fund this year for more seed round investments to support the sector's rapid growth.

Cyberstarts, which started in 2018 and is backed by Sequoia Capital and other investors, said it has invested in some nine cyber startups in its initial $54 million seed fund and six more companies in a subsequent $100 million seed fund.

The new "opportunity" fund would invest up to $15 million per round in companies in its seed funds for Series A and B funding rounds, Cyberstarts founder Gili Raanan told Reuters.

The growth of cyber companies, he added, has come as the amount of threats have risen - from Bitcoin to cloud to self driving cars. "With every new business or new technology there is a need for a new type of security solution," Raanan said.

"We are likely to invest in around 12 to 14 companies," said Raanan, also a partner at Sequoia. "We have already have identified follow-on investments for two companies in our portfolio, so we will start to deploy money right away."

He noted that Cyberstarts - co-managed by general partner Lior Simon - would likely launch a third seed fund of $50-$60 million by the end of 2022 to meet growing demand for investments in cyber firms.

Over the past decade, as many 100 cyber Israeli security firms were funded each year, Raanan said. "It's a staggering number. It means that in the next 10 years, you will have 1,000 new cyber security companies."

In Israel, there are about 450 active cyber firms, compared with a 1,000 in the United States and 200 in Europe, he said.

Cyberstarts cited outside research saying its first $50 million fund is now valued at $1 billion, with returns averaging 300% a year the last four years. In 2021, its portfolio companies raised $1.3 billion for a combined valuation of $20 billion, Simon said.

Among Cyberstarts' portfolio companies are cyber startup Wiz, which last October raised $250 million at a $6 billion valuation, and crypto-currency security company Fireblocks, which last month raised $550 million at a value of $8 billion.

Our Standards: The Thomson Reuters Trust Principles.