U.S. firms look to Israeli cyber market for answers

PayPal’s reported purchase of Israeli cybersecurity firm CyActive is the latest example of the growing influence of the Israeli cyber market on the U.S.

According to multiple Israeli media outlets, the secure online payment service is dropping $60 million to purchase CyActive, which predicts what malware hackers are going to invent next.


The Israeli cyber market has exploded in recent years, analysts explained to The Hill.

“I wouldn’t be lying if I said I saw two new cybersecurity startups a week,” said Israeli-based venture capitalist Adam Fisher of Bessemer Venture Partners.

Israel’s Unit 8200 within the Israel Defense Forces has trained world-class hackers that are starting to enter the private sector after finishing their required military service.

“In Israel the best and the brightest are going through the intelligence services and then looking for ways to build something commercial afterward,” said David Cowan, also a venture capitalist with Bessemer, who has been travelling to Israel searching for cyber talent since 1995.

While Silicon Valley is throwing money at former National Security Agency (NSA) employees, many NSA cyber staffers are career government workers.

With only a few years of conscription in Israel, Unit 8200 annually churns out a new class of security experts.

Fisher said there are over 200 locally-launched cyber startups in Israel, a country with about 8 million citizens. But it’s hard to keep track because of industry’s brisk growth.

“It’s just been quite unbelievable with what we’ve seen,” Fisher said.

The country has quickly become the world’s second largest exporter of cyber products, generating roughly $3 billion in 2013 exports.

“It’s during the last 18 months that we’ve seen a stream of new approaches coming out of Israel … that have distinguished that community,” Cowan added. “The Israeli startups are focused on practical solutions to detecting and stopping malicious operations inside of the network.”

U.S. companies have taken notice.

Defense contracting giant Lockheed Martin recently opened a cyber-focused subsidiary in Israel. PayPal parent company eBay, the online marketplace, bought out two Israeli cyber firms and opened its own Israeli-based research and development center.

PayPal itself also acquired Israeli-based FraudSciences, which monitors financial fraud, in 2008 for $170 million.

And investors are rewarding companies turning to Israel.

EBay got a positive response from Wall Street on Monday, as the company’s shares were up roughly 1.5 percent throughout the day.

EBay has announced it will soon spin off PayPal into a separate company.